^ 


University  of  California. 


GIB"1'  <)W 

V 


Alexander  Del  Mar. 


ISTB 


Accessions  No.  /A/^f^/         Shelf  No . 


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MEMORIAL    TO    CONGRESS 

UPON    THE    SUBJECT    OF 

REPUBLICAN   FREE    BANKING. 


To  the  Honorable  the  Senate ^  and 

House  of  Representatives^  ire  Congress  assembled : 
Your  memorialists,  feeling  the  importance  of  a  sound  currency 
to  a  nation  desirous  of  maintaining  their  political  independence, 
and  financial  and  commercial  prosperity,  and  having  observed  the 
:^ealous,  .though  unsuccessful  exertions  for  years  past,  of  the  Con- 
gress of  the  United  States  and  the  several  State  Legislatures, through 
the  agency  of  incorporated  banking  companies,  to  make  bank  paper 
and  gold  silver  at  all  limes  interchangeable  for  each  other,  and  cur- 
rent throughout  the  Union;  and  having  witnessed,  with  painful  anxi- 
ety, the  various  operations  of  the  present  chartered  bank  system  of 
furnishing  paper  to  circulate  as  money,  and  finding  it  to  be  extreme- 
ly defective,  and  occasioning  th^  public  much  inconvenience,  as  the 
bank  notes  issued  under  it  are  not  uniformly  current  throughout  the 
Union,  thereby  making  the  rates  of  exchanges  hi|:h  between  distant 
parts  of  the  United  States,  expensive  and  inconvenient  in  remitting 
funds  from  place'  to  place,  and  in  defraying  travelling  expenses. 
And  also,  having  seen  the  frequent  expansions,  contractions  and 
various  fluctuations  of  the  circulating  medium  furnished  under  this 
sj^stem,  by  which  the  value  of  property  is  rendered  uncertain,  and 
money  looses  its  peculiar  business  properties,  that  of  being  a  medial 
conimodity,  passing  freely  from  one  person  to  another,  and  as  an 
exact,  uniform,  and  unchangeable  a  measure  of  values,  for  past, 
present  and  future  times,  as  standard  weights  and  measures  are  of 
quantities,  and  precisely  the  satne  throughout  the  Union. 

Your  memorialists,  therefore,  are  of  the  opinion,  that  there  must 
be  something  radically  wrong  in  the  elementary  principles  of  the 


present  system  of  banking,  as  conducted  by  incorporated  companies, 
j-o  produce  such  a  discrepancy  in  its  working  in  unison  with  the 
other  fundamental  political  machinery  of  our  government ;  and 
would  respectfully  represent,  that  the  spirit  of  the  Declaraiion  of 
Independence,  and  of  the  Constitution,  gives  the  people  the  right  to 
expect  the  same  free  control  of  the  currency  that  they  have  of  the 
other  elementary  principles  of  the  government,  consequently  there 
should  be  no  more  legislation  upon  that  subject  than  upon  the  form  of 
our  government,  our  religion  or  literature. 

In  the  hope  of  transmitting  to  the  latest  posterity,  pure,  entire  and 
unimpaired,  those  great  and  glorious  principles  of  human  happiness, 
of  national  and  individual  prosperity,  centered  in  our  government 
by  its  patriotic  founders ;  and  with  a  view  to  a  radical  renovation  of 
our  monetary  afiairs,  we  beg  leave  to  call  the  attention  of  your 
honorable  body  to  the  following  plan  for  Republican  Free  Banking, 
in  the  expectation  that  your  collective  wisdom  may  adopt  it,  or  de- 
vise some  permanent  and  efficient  system  of  banking  better  adap- 
ted to  the  genius  of  our  government,  the  character  of  our  institu- 
tions, and  the  state  of  existing  contracts,  than  that  of  our  present 
incorporated  banking  companies. 

The  following  plan,  based  upon  the  principles  of  the  Declara- 
tion of  Independence,  and  of  the  Constitution,  centralizes  the  gov- 
ernment of  the  currency ;  thereby  furnishing  us  with  all  the  national 
advantages  of  a  United  States  bank,  while  it  avoids  its  apprehended, 
financial  and  political  evils  by  a  divided  administration,  and  es- 
capes the  vexed  question  of  its  constitutionality.  It  obviates  the  dan- 
ger of  over-expansions  and  contractions  of  the  currency,  by  remo- 
ving the  injlimice  of  ^private  interest^  of  credit^  and  of  politics.  The 
first  is  effected,  by  giving  the  people  the  election  of  the  directors 
of  the  Banks,  both  of  Issue  and  of  Discount.  The  second,  by  sep- 
arating the  Bank  of  Issue  from  the  Banks  of  Discount,  and  limit- 
ing its  circulation  to  not  more  than  three  times  the  amount  of  specie 
actually  in  its  vaults  at  the  time  of  the  issue  ;  and  confining  the 
Banks  of  Discount  to  the  discounting  of  actual  business  paper,  hav- 
ing but  short  periods  to  run,  and  in  which  no  director  has  any  inter- 
est. The  third,  by  removing  the  necessity  for  future  legislation  upon 
the  subjects  of  banks  and  currency. 

This  plan  is  the  organization  of  the  people,  by  Congress,  through- 
out the  Union  for  financial  purposes,  with  power  to  regulate  the  pa- 


per  portion  of  the  currency  as  they  are  at  present  organized  to  reg- 
ulate their  township  adminstrations.  Empowering  the  electors  of 
the  Union  to  elect  the  directors  of  the  United  States  Bank— the 
Bank  of  Issue  ;  the  electors  of  each  State  the  directors  of  their  re- 
spective State  Banks  ;  and  the  electors  of  each  place,  where  a  Bank 
of  Discount  is  located,  the  directors  of  such  banks  respectively; 
as  they  elect  the  most  numerous  branches  of  their  legislatures. 

The  directors  of  the  United  States  Bank— the  Bank  of  Issue- 
should  be  elected  for  the  same  length  of  time  as  are  the  Senators  of 
the  United  States,  and  so  that  only  one-sixth  part  of  them  should 
vacate  their  seats  annually,  for  the  purpose  of  giving  permanency 
and  stability  to  the  currency';  while  the  directors  of  all  the  other 
Banks  should  be  elected  annually  to  secure  their  frequent  and  per- 
fect accountability  to  the  people. 

The  management  of  the  currency  will  then,  like  the  other  ele- 
mentary principles  of  our  government,  be  purely  republican. 

The  duties  ofthe  directors  of  the  U.  States  Bank  of  Issue  shall  be , 
to  ascertain  the  amount  of  currency  necessary , for  the  permanent 
prosperity  of  the  country ;  to  cause  plates  to  be  engraved  and  bills  to 
be  printed,  in  the  best  manner,  to  avoid  counterfeits,  and  that  there 
may  be  a  uniformity  in  their  appearance ;  and  cause  to  be  signed, 
registered  and  numbered  so  many  bills  of  such  denominations  as 
shall  be  necessary  for  the  convenient  interchange  of  commodities, 
and  issue  the  same  to  the  directors  of  the  several  State  Banks,  ac- 
cording to  their  demands,  together  with  their  respective  proportions 
of  specie. 

The  duties  ofthe  directors  of  the  several  State  Banks  shall  be,  to 
cause  to  be  re-signed  and  re-registered  the  bills  issued  to  them  re- 
spectively by  the  United  States  Bank  of  Issue,  and  to  apportion  the 
same  among  their  several  local  Banks  according  to  their  demand^ 
for  the  same,  together  with  their  respective  proportions  of  specie, 
and  to  take  a  general  supervision  ofthe  same. 

The  duties  of  the  directors  of  the  several  local  Banks— the 
Banks  of  Discount — (after  giving  good  security  for  the  faithful  dis- 
charge of  their  duties,  and  the  prompt  payment  over  to  their  succes- 
sors, when  their  terms  of  office  shall  expire,  of  all  monies  or  prop- 
erty of  the  bank  in  their  hands,)  shall  be,  to  execute  the  bills  furnish- 
ed them  by  their  respective  State  Banks,  by  signing  them,  and  ma- 
king them  payable  in  specie  on  demand,  at  their  several  counters, 


and  loan  the  same,  by  discounting  actual  business  paper,  having  but 
short  periods  to  rnn,  and  in  which  no  bank  director  has  any  interest, 
either  directly  or  indirectly. 

The  directors  of  the  local  Banks  should  not  loan  large  sums  to 
speculators,  when  their  doing  so  will  deprive  them  of  the  means  of 
discounting  the  regular  business  paper  of  the  place;  although  such 
speculators  can  afford  to  make  the  loan  much  more  profitable  to  the 
stockholders  than  their  ordinary  business,  by  making  their  notes 
due  in  a  distant  city,  to  which  they  export  their  purchases,  and 
where  the  rate  of  exchange  is  high  against  the  place"  where  the 
bank  is  located,  on  which  place,  in  addition  to  the  lawful  interest^ 
the  bankers  can  sell  their  drafts  for  a  large  premium  on  the  exchange- 
The  election  of  the  directors  by  the  people  interested  in  the  dis- 
counts, will  obviate  this ;  since  one  hundred  fair  traders,  who  in- 
quire a  credit  at  the  bank  of  one  thousand  dollars  each,  will  exercise 
far  more  influence  at  the  election  of  directors,  than  one  speculator 
with  one  hundred  thousand  dollars.-  American  manufactures  will 
thus  be  encouraged — inland  commerce  facilitated — the  farming  in- 
terests promoted — and  paper  money  be  made  strictly  convertible, 
uniform  in  its  value,  and  as  easily  to  be  obtained  as  other  commod- 
ities, without  interfering  with  existing  banking  institutions. 

The  insiduous  encroachments  upon  society,, through  chartered 
banking  companies,  of  dishonest  principles  in  our  business  transac- 
tions, of  a  depravity  of  moral  sentiment,  and  disregard  of  moral 
honor  and  honesty  in  the  conduct  of  our  monetary  affairs,  will  be 
effectually  checked  by  the  adoption  of  the  proposed  system  of  Re- 
publican Free  Banking.  The  evasion  of  a  law,  is  but  one  step 
short  of  its  open  violation.  And  the  passage  of  bank  notes  at  par, 
which  are  one,  five  or  ten  per  cent,  below  par,  is  but  one  step  from 
paying  out  a  parcel  of  bills,  in  which  there  is  known  to  the  payer 
to  be  one,  five  or  ten  dollars  of  counterfeit  money. 

This  system  of  Republican  Free  Banking,  that  your  memorialists 
propose  to  your  honorable  body  for  adoption,  is  designed  to  give  the 
paper  portion  of  the  currency  a  metalic  character ;  with  all  the  ad- 
vantages to  the  bill-holders  and  stockholders  that  could  be  obtained 
by  a  chartered  United  States  bank  and  branches,  without  the  dangers 
and  inconveniences  of  the  centralized  administration  of  such  an  im- 
mense financial  and  political  power  as  the  latter  must  possess,  and 
from  the  laws  of  its  situation  would  be  likelv  to  exercise.    It  cen- 


f 


tralizes  the  government  of  the  currency  and  divides  its  administra- 
tion. Giving  to  the  United  States  Bank— the  Bank  of  Issue— the 
centralized  control  of  the  capital  stock,  the  specie  received  for  the 
sale  of  the  stock,  the  issue  and  apportionment  of  the  bills  and  specie 
among  the  several  State  Banks,  the  profits,  the  safety  fund,  the  divi- 
dends, the  forms  of  business,  and  of  making  returns  for  publication. 
While  it  completely  separates  the  administration  of  the  currency 
from  the  general  U.  States  or  several  State  Banks  of  Issue,  and  di- 
vides it  among  the  people,  by  giving  to  the  electors  of  the  several 
places  where  local  Banks— the  Banks  of  Discount — are  situated,  the 
election  of  the  directors  of  the  same  respectively ;  and  confines 
these  banKs  to  the  discounting  of  only  actual  business  paper,  hav- 
ing but  short  periods  to  run,  and  in  which  no  director  has  an  inter- 
est, either  directly  or  indirectly,  and  to  the  ordinary  business  of  a 
bank  of  discount.  This  will  render  the  administration  of  the  curren- 
cy as  divided  and  independent  of  its  govemnient,  as  are  the  election 
of  the  ofiicers  and  administration  of  the  affairs  of  the  townships 
separate  and  independent  of  the  government  of  the  Union. 

Your  memorialists  trust,  that  the  stock  of  an  United  States  Bank, 
founded  upon  the  principles  of  republican  free  banking,  will  be  as 
saleable  and  productive  as  any  stocks  in  America ;  while  it  will  con- 
stitute a  bond  of  union  between  the  citizens  and  government  of  this 
country  upon  the  all-powerful  principle  of  self-iiiterest,  equal  to 
that  which  supports  the  government  of  Great  Britain  in  the  bond 
of  private  interest  caused  by  its  national  debt,  without  any  of  its 
concomitant  evils.  This  stock  would  probably  constitute  the  most 
profitable,  safe  and  permanent  investment  of  capital  in  the  United 
States,  if  not  in  the  world :  being  cash  in  hand  when  capital  is  re- 
quired, money  at  interest  at  all  times,  and  convertible  into  specie  the 
same  as  the  funded  debts  of  America  or  England.  The  bill-hol- 
der would  be  secure  from  the  failure  of  banks,  or  the  depreciation 
of  their  notes;  and  the  public  from  the  expansions  and  ruinous 
consecutive  contractions  of  the  currency. 

Your  memorialists,  therefore,  respectfully  pray,  that  your  honor- 
able body  will  be  pleased  to  take  the  subject  of  the  banks  and  currency 
into  your  serious  consideration ;  and  to  authorise  the  people  to  pro- 
vide themselves  with  a  republican  currency,  that  shall  be  free  from 
the  influence  of  private  interest,  credit,  or  politics — strictly  conver- 
tible, uniformly  current  throughout  the  Union,  and  as  easily  to  be 


obtained  as  other  commodities ;  or  in  such  manner  as  your  honor- 
able body  may  deem  meet,  provide  for  the  formation  of  a  sound  cur- 
rency, that  shall  be  current  throughout  the  Union.  And  your  peti- 
tioners, as  in  duty  bound,  will  ever  pray,  &c. 


QJ^This  Memorial  has  been  forwarded  by  mall  to  above 
four  hundred  Editors  of  news-papers,  without  distinction 
of  party,  with  a  request  for  them  to  publish  it,  and  an  offer 
of  one  copy  of  this  book  (price  One  Dolhir,)  on  their  send- 
ing a  paper  containing  the  same  to  the  Author. 


A    LETTER 


THE  HON.  THE  SECRETARY  OF  STATE. 


Cleveland,  Ohio,  June,  1641. 

■^^To  THE  Hon.  DANIEL  WEBSTER, 

Secretary  of  State,  &c.  &c.  Washington. 
Hon.  Sir  : — 

I  see  by  the  newspapers,  that  there  is  a  proposition  before  Congress 
for  an  United  States  Bank ;  and  believing  that  it  is  not  only  the  privilege,  but  the 
duty  of  every  American  citizen,  frankly  to  communicate  to  the  government  what- 
ever may  appear  to  him  to  be  important,  and  having  spent  much  time  and  attention 
for  several  years  past  upon  the  subject  of  Banks,  Currency  and  Exchanges,  I  take 
the  liberty  of  forwarding  to  you  briefly  my  views  upon  the  subject. 

The  plan  I  propose  is  an  United  States  Bank  of  Issue,  with  a  centralized  govern- 
ment, and  local  Banks  of  Discount,  with  divided  and  independent  administrations. 
This  would  render  currency  as  republican  as  the  other  elementary  principles  of  thd 
government;  separate  it  from  politics,  from  credit,  and  from  the  influence  of 
private  interest  ;  and  make  bank  notes  always  perfectly  interchangeable  for 
gold  and  silver,  equally  current  throughout  the  Union,  and  as  easily  to  be  obtained 
as  any  other  commodities. 

I  find  but  few  men  of  either  of  the  great  political  parties,  of  any  profession,  trade 
or  business,  who  do  not  believe  with  me,  that  the  enterprising  "go  ahead"  spirit 
of  Americans,  the  present  state  of  contracts  both  at  home  and  abroad,  public  and 
private,  aa  well  as  the  inflated  credit  currencies  of  Great  Britain,  and  most  other 


% 


8 

countries  with  which  our  foreign  commerce  is  carried  on,  require  a  larger  circula- 
ting medium  than  the  quantity  of  the  precious  metals  that  could  at  present  be 
brought  into  circulation  constitute. 

To  whom  then  of  right  belongs  the  regulation  of  the  material,  that  is  to  a  cer- 
tain extent  to  supply  their  place  and  make  up  the  deficiency  ?  I  answer  to  the  sove- 
reign power — that  is,  to  the  whole  people.  In  a  monarchy,  a  government  of  force 
and  fear,  the  Sovereign  should  regulate  the  currency,  directly  by  his  own  officers, 
or  indirectly  through  chartered  companies  exercising  their  powers  at  his  pleasure. 

I  conceive  the  unconstitutionality  of  chartering  companies,  to  consist  in  the  rep- 
resentative disposing  of  the  trusts  delegated  to  him  for  a  longer  period  than  he 
had  been  elected,  to  companies  whose  private  rights  supervene  and  preclude  his  suc- 
,cessor  in  office  from  disannulling  his  acts,  however  dissatisfactory  to  his  constitu- 
ents they  may  have  become ;  whereby  the  representative  is  unable  to  return  into  the 
hands  of  his  constituents  all  the  powers  that  had  been  entrusted  to  him.  This  is 
equally  applicable  to  States  as  to  United  States  charters. 

I  view  the  evils  of  a  chartered  United  States  bank,  with  branches,  to  consist  in 
the  concentration  of  the  wealth  and  money  of  the  country,  which,  from  the  laws  of 
its  situation,  must  constitute  a  powerful  financial  and  political  engine ;  always  accu- 
mulative and  directed  to  the  promotion  of  its  own  ends,  and  the  advancement  of  its 
own  friends.  With  such  an  engine  at  its  disposal,  a  corrupt  administration  might 
perpetuate  itself  as  long  as  it  chose  to  support  the  bank. 

If  it  be  said,  that  we  have  had  United  States  banks,  with  branches,  that  did  not 
perpetuate  themselves,  nor  the  administrations  that  supported  them  ;  to  this  I  re- 
ply, the  banking  business  of  the  country  was  not  then  concentrated  in  one  institu- 
tion— state  chartered  banks  were  not  only  sometimes  actually  arrayed  against  the 
United  States  Bank,  but  they  accommodated  great  portions  of  the  community  with 
their  credit,  rendering  them  independent  of  that  bank ;  besides,  we  may  never  have 
had  an  administration  sufficiently  corrupt  to  unite  itself  to  the  bank,  and  through 
its  agency,  to  bribe  the  press  and  thus  control  legislation ;  therefore,  I  by  no  means 
view  this  circumstance  as  at  all  conclusive  that  such  an  event  could  not  happen. 

The  object  sought  to  be  obtained  by  the  legislature  in  authorising  the  issue  and 
circulation  of  bank  paper  as  money,  is  to  furnish  a  portion  of  the  circulating  me- 
dium sufficient  to  supply  the  deficiency  of  the  precious  metals,  occasioned  by  their 
exportation,  possessing  metalic  financial  properties ;  being  equally  current  through- 
out the  Union,  always  strictly  convertible  at  the  counter  where  it  was  put  in  circu- 
lation, and  not  liable  to  be  over-issued. 


9 

Chartered  banking  companies,  whether  incorporated  by  Congress  or  state  legis- 
latures, have  all  failed  in  their  efforts  to  accomplish  this  object ;  and  they  must 
continue  to  fail  sooner  or  later,  however  carefully  their  charters  are  guarded,  while 
they  have  the  whole  control  of  the  currency.  The  laws  of  their  situation  compel 
them  to  make  as  much  money  out  of  the  people  and  out  of- the  government  as  they 
legally  can. 

Some  of  the  defects  of  state  chartered  banks  arise  from  a  want  of  a  centralized 
government  of  their  issues.  The  currency  they  produce  wants  in  uniformity  in  its 
metalic  character ;  in  uniformity  in  its  quantity  of  circulation  •,  in  uniformity  in  its 
currency  throughout  the  Union  ;  and  it  wants  in  public  confidence  from  its  occa^ 
sional  defective  interchangeability. 

.  A  chartered  United  States  Bank,  with  branches,  would  remedy  some  of  the  exist- 
ing  evils  of  the  currency ;  but  the  directors,  Q\ke  those  of  all  other  chartered  in- 
stitutions,) being  interested  in  its  business  and  dividends,  must,  according  to  the 
laws  of  their  situation,  make  as  much  money  as  they  can  by  their  charter. 

They  might  be  induced  to  deal  in  exchanges,  as  did  the  old  United  States  Bank, 
which,  by  its  power  of  expanding  the  currency  temporarily  at  points  where  it  wish- 
ed to  purchase,  and  contracting  it  at  points  where  it  wished  to  sell,  (which  it  could 
do  at  will,  to  an  almost  unlimited  extent,)  kept  the  currency  and  exchanges  in  a 
constant  state  of  fluctuation  and  uncertainty,  while  those  who  sold  bills  got  less> 
and  those  who  bought  paid  more  for  them,  than  they  would  have  done  had  the  busi- 
ness been  left  to  private  competition,  as  it  is  in  other  parts  of  the  world ;  or  they 
might  directly  themselves,  or  indirectly,  through  the  agencies  of  brokers  and  spec- 
ulators, engage  in  commerce  and  speculations,  as  did  the  United  States  Bank  of 
Pennsylvania— when  a  similar  fate  must,  sooner  or  later,  overtake  them ;  or,  by  dis- 
counting fictitious  notes  and  acceptances,  payable  at  distant  places  Advantageous  to 
themselves,  give  their  credit  to  speculators  to  large  amounts,  to  the  exclusion  of  the 
fair  trader,  the  injury  of  commerce,  and  the  over-expansions  and  consecutive  con- 
tractions of  the  currency. 

The  proposed  plan,  by  centralizing  the  government  of  the  currency,  possesses  all 
the  advantages  of  an  United  States  Bank  and  branches,  both  to  the  public  and  to 
HONEST  stockholders,  and  divides  the  administration  of  the  currency,  thereby  whol- 
ly, entirely  and  perfectly  removing  the  justly  to  be  apprehended  evils  of  the  con- 
eentration  of  such  an  immense  monied  power. 

I  know  of  no  sound  political  or  financial  reason,  why  the  paper  portion  of  the 
currency  should  be  entrusted  to  the  regulation  and  control  of  one  or  more  interest- 


10 

ed  private  companies,  any  more  than  should  be  the  control  of  tlie  mint,  or  the  regu- 
lation of  weights  and  measures.  Monej^  being  the  measure  of  all  values,  should  be 
as  immutable  and  permanently  established  as  either  of  these  are.  Nor  can  I  fancy 
any  good  reason,  besides  the  exploded  one  of  expediency,  why  a  few  individuals 
should  be  allowed  to  make  a  profit  upon  the  circulation  of  paper  to  make  up  the 
deficiency  of  the  precious  metals  ;  or  why  they  should  be  allowed  any  more  to  in- 
terfere with  its  regulation  on  account  of  their  being  stockholders,  than  would  be 
the  holders  ofStates  or  of  United  States  funds,  or  than  are  the  holders  of  the  funds  of 
Great  Britain,  or  of  any  other  country.  No  one  will  doubt  the  inexpediency  and 
impolicy  of  allowing  one  or  more  private  companies  the  control  and  regulation  of 
the  public  debts. 

All  these  exigencies  may,  however,  be  provided  for  by  giving  the  people  the  elec- 
tion of  the  directors  of  the  banks,  in  the  same  manner  as  they  elect  the  most  nu- 
merous branches  of  their  legislatures,  (instead  of  leaving  it  to  stockholders,  who 
have  uniformly  exclusively  enjoyed  it ;)  and  separating  the  Bank  of  Issue  from  the 
Banks  of  Discount ;  centralizing  the  government  of  the  former,  and  rendering  the 
administration  of  the  latter  divided  and  independent.  This  may  be  done  by  the 
passage  of  a  law  by  Congress,  authorising  the  electors  throughout  the  Union  to  elect 
directors  of  the  United  States  Bank,  the  Bank  of  Issue ;  the  electors  ia  each  State 
to  elect  directors  of  State  Banks,  of  secondary  issue  and  supervision ;  the  electors 
of  cities,  towns  and  districts,  where  Banks  of  Discount  are  located,  the  election  of 
the  directors  of  the  same.  The  directors  of  Banks  of  Discount  should  give  good  se- 
curity for  the  monies  passing  tlirough  their  hands ;  be  restricted  in  their  discounts 
to  not  issue  more  paper  than  three  times  the  amount  of  specie  in  the  vaults  of  the 
bank  at  the  time  of  the  discount ;  and  to  discounting  only  actual  business  paper, 
having  but  short  periods  to  run,  and  in  which  no  director  has  any  interest.  They 
would  be  limited  to  the  amount  of  bills  furnished  them  by  the  Bank  of  Issue.  This 
would  give  the  people  the  same  control  of  the  currency  that  they  have  of  their  pol- 
itics. 

The  centralization  of  the  paper  portion  of  the  currency,  by  giving  the  United 
States  Bank  of  Issue  the  regulation  and  control  of  the  stock,  the  specie  received 
for  the  sale  of  the  stock,  the  issue  of  bills  to  circulate  as  money,  their  apportion- 
ment (together  with  the  specie  necessary  for  a  basis,)  between  the  several  States  ac- 
cording to  their  respective  demands  for  a  circulating  medium,  the  apportionment 
of  the  dividends  of  the  Banks  between  the  stockholders,  the  reservation  of  a  safety 
fund,  and  its  application  when  necessary  to  relieve  any  temporary  casual  embar- 


11 

rassments  of  a  Bank  or  Banks  of  Discount,  and  the  publication  of  regular  period- 
ical statements  of  the  institution,  with  every  other  power  necessary  to  the  perfect 
government  of  the  currency,  that  would  not  interfere  with  its  independent  admin- 
istration by  the  Banks  of  Discount.  This  would  give  this  institution  and  the  coun- 
try all  the  benefits  of  an  United  States  Bank  and  branches,  without  its  dangerous 
concentration  of  power  and  influence  ;  while  dividing  the  administration  of  the 
Banks  of  Discount  between  the  several  cities,  towns,  and  districts,  where  they  are 
located,  and  by  whose  electors  the  directors  are  elected,  would  complete  its  inde- 
pendence. 

The  friends  of  republican  institutions  may  safely  rely  for  support  upon  the  de- 
mocracy of  numbers  possessing  virtue  and  intelligence,  unless  the  power  and  in- 
fluence of  the  aristocracy  of  wealth  should,  through  the  aid  of  the  interest  of  char* 
tcred  companies,  suborn  the  press  and  thereby  bandage  the  people's  eyes. 

To  prevent  this,  the  proposed  plan  provides  this  profitable  Bank  Stock  for  the  in- 
vestment of  capital,  to  unite  the  private  interests  of  capitalists  in  support  of  repub- 
lican institutions ;  becoming  a  bond  of  union  between  the  wealth  and  wealthy  of 
the  country  and  our  government,  upon  the  all-powerful  principle  of  self-intere8T» 
similar  to  that  which  unites  the  monied  men  of  Great  Britain  in  support  of  their 
government. 

With  an  anxious  desire  for  the  promotion  of  the  peace,  prosperity  and  good  gov- 
ernment of  these  United  States,  and  with  high  respect  for  yourself, 

I  have  the  honor  to  subscribe  myself, 

Your  most  obedient  servant, 

CHARLES  BUNCOMBE. 


DUNCOMBE'S  FREE  BANKING: 


AN   ESSAY 


ON 


BANKING,  CURRENCY,  FINANCE,  EXCHANGES, 


POLITICAL  ECONOMY. 


BY  CHARLES  BUNCOMBE, 

A  NATIVE  AMERICAN. 

Late  Chairman  of  the  Committee  on  Finance,  Chairman  of  the  Committee  on 
Currency  and  Banking,  Acting  Commissioner  for  obtaining  information  during  the 
recess  of  Parliament  in  1835,  upon  the  subjects  of  Schools  and  Colleges,  Lunatic 
Asylums,  Finance,  Currency,  Banking,  and  other  subjects  of  Public  Economy, 
and  Author  of  a  Report  upon  Education,  in  the  Parliament  of  Upper  Canada. 


^J:'^^ 


CLEVELAND:  "•  J*"l|»^  A' 


PRINTED  BY  SANFORD '&;Q|>«>  '^  f  ' 

1841. 


:'»4//. 


*»; 


Entered  according  to  Act  of  Congress,  in  the  year  1841^ 

BY     CHARLES     DUNCOMBE, 

in  the  Clerk's  Office  of  the  District  Court  of  the  State  of  Ohio. 


CONTENTS. 


Dedication       -.---. 

Page 
9 

Preface            --.-.- 

11 

Notice  of  the  Plan  or  Currency     -            -           - 

17 

Introduction    ------ 

21 

CHAPTER  I. 

On  the  state  of  the  Currency  of  the  United  States    - 

-        45 

CHAPTER  II. 

State  Chartered  Banks           .            -           ,           . 

-        49 

CHAPTER  III. 

The  Object  of  the  Work          .... 

57 

CHAPTER  IV. 

On  the  various  kinds  of  Currency  in  United  States    - 

'-        59 

CHAPTER  V. 

On  Uncurrent  Money            .           -           -           . 

64 

CHAPTER  VI. 

On  the  influence  of  Banks  upon  their  neighborhoods 

72 

CHAPTER  VII. 

On  Republican  Currency        - 

•        77 

CONTENTS. 


Page 


CHAPTER  VIII. 

On  the  immense  powers  of  Incorporated  Companies  -        83 

CHAPTER  IX. 

The  effects  of  alloying  the  Coin  of  any  country       -  -       89 

CHAPTER  X. 

The  effects  of  Bank  failures  upon  public  morality  -        90 

CHAPTER  XL 

English  and  American  Currencies     -  -  -  -       92 

CHAPTER   XII. 

On  the  evils  of  Small  Bills      -           -           -           -           -        93 
On  Public  Gullibility 94 

CHAPTER  XIV. 

ON  THE  CURRENCIES. 

Gold  the  Natural  Currency  of  the  United  States        -  -  95 

On  the  Currency  of  Foreign  Coins    -  -  -  -  95 

On  the  value  of  the  Precious  Metals  -  -  -  96 

On  the  cost  of  producing  the  Precious  Metals  -  *  96 

Gold  and  Silver  real  Wealth    -  -  ...  97 

Paper  Money  not  Wealth        -  -  -  -  -  97 

CHAPTER  XV. 

ON  BANKING. 

its  Legitimate  Business           -----  98 

Of  Banks  of  Deposite,  Discount,  and  Circulation     -           -  99 
Banks  of  Deposite  and  Banks  of  Discount  safe  and  highly 

serviceable  to  a  commercial  community     -           -           -  101 

Of  Credit  Commercial  Bank  paper    -           -           -           -  102 

CHAPTER  XVI. 

>  On  the  limited  responsibility  of  Bank  Directors  and  Stock- 
holders ---.---      103 


CONTENTS. 


CHAPTER  XVII. 


Page 


On  the  limited  responsibility  of  Chartered  Banks  -  -  104 

On  the  Exchange  of  Notes  with  Banks          .  -  -  106 

Promises  to  pay  Money,  not  Money    -           -  -  -  107 

On  perfect  individual  liability  of  Banks         -  -  -  108 

CHAPTER  XVIIl. 

FREE  BANKING. 

The  People's  System  of  Banking  requires  unlimited  respon- 
sibility, with  good  security  from  the  Directors  for  all  mon- 
ey that  passes  through  their  hands    -  -  -  -      110 

The  proposed  plan  of  Free  Banking  should  neither  expand 
nor  contract  Currency,  nor  have  its  convertibility  ques- 
tionable        -  -  ^  -  -  -  -      112 

On  Free  Republican  Banking  ....      113 

CHAPTER  XIX. 

A  larger  Circulating  Medium  than  the  Precious   Metals 
necessary      -  -  -  -  -  -  -116 

To  prevent  improper  expansions  of  the  Currency    -  -      116 

The  Election  of  Directors       -----      117 

Rivalry  and  Commercial  Prosperity  encourage  over-issues 
of  Bank  Paper  ...--.      118 

CHAPTER  XX. 

The  issue  of  Small  Bills  increases  panics      -           -           -  119 

Bank  Competition.    Bank  notes  actually  a  tender     -           -  119 

^  Bank  Securities           -.--..  122 

Stock  in  one  uniform  Currency  profitable  and  saleable        -  122 

CHAPTER  XXI. 

ON  OBJECTIONS  TO  FREE  BANKING. 

Of  the  Objections  to  a  Republican  Currency  -  -      124 

CHAPTER  XXII. 

Chartered  Banking  Companies  Anti-Republican  and  Dissat- 
isfactory       -----.-      125 
The  defects  of  the  Currency  produced  by  Chartered  Banks      128 


CONTENTS. 


Page 


CHAPTER  XXIII. 

A  remedy  for  the  want  of  Capital.  Bank  notes  are  not  Capital      130 
CHAPTER  XXIV. 

The  interest  of  Stockholders  the  rule  of  action  for  Chartered 
Banks  132 

The  profits  made  by  a  Bank,  above  the  fair  marketable  rate 
of  interest,  extortion  -----      133 

CHAPTER  XXV. 

On  Moral  Obligations  -  -  -  -  -      136 

Ex-President  Jackson's  Veto  of  the  United  States  Bank  Bill      136 

CHAPTER  XXVI. 

The  Powers  of  Congress  -  -  -  -  -  137 

The  organization  of  the  People  by  Congress  -  -  139 

On  the  Powers  of  Congress    -----  142 

In  Currency,  changes  not  always  reforms     -  -  -  I43 

CHAPTER  XXVII. 
Moral  Principle  above  all  Law         _  .  ,  -      145 

CHAPTER  XXVIII, 
Periodical  Bank  Statements    -  -  -  -  -      151 

CHAPTER  XXIX. 
On  Exchanges  and  Bank  Monopoly  -  -  -      155 

CHAPTER  XXX. 
On  comparisons  of  the  Currency  with  the  Government       -      165 

CHAPTER  XXXI. 

On  the  centralized  Government  of  the  Currency,  and  its  di- 
vided Administration  -  -  -  .  -      171 

CHAPTER  XXXII. 
Of  Bank  Influence       -  -  -  -  ^  -      173 


CONTENTS.  7 

Page 

CHAPTER  XXXIII. 

A  Chartered  United  States  Bank  and  Branches        -  -      18*2 

^    How  to  obtain  the  benefits  of  an  United  States  Bank  and 

Branches,  without  its  evils  -  -  -  -      193 

CHAPTER  XXXIV. 

On  the  effects  that  the  Currency  of  a  country  has  upon  its 
Independence  ------      198 

CHAPTER  XXXV. 

Thread-Needle  Lane  the  centre  of  monied  attraction  -      205 

CHAPTER  XXXVI. 

To  render  the  paper  portion  of  the  Currency  as  stable  as 

Gold  and  Silver        -           -            -            -            -            -  207 

On  Credit  connected  with  Public  Improvements        -            -  210 

^  The  Objections  to  a  Paper  Currency  considered        -           -  218 

CHAPTER  XXXVII. 

\  /On  Exchanges,  and  the  mystery  involved  in  their  Computa- 
tion   -----  ^  ..      227 

CHAPTER   XXXVIII. 

On  the  convertibility  of  Bank  paper;  and  on  British  Politics  250 

The  National  Debt  of  Great  Britain   -            -            -            .  256 
Fund-holders  exercise  no  influence  over  the  management  of 

the  funds      -------  257 

CHAPTER  XXXIX. 

Free  Republican  United  States  Bank  -  ^  -      259 

The  aristocracy  of  Incorporated  Companies  -  -      260 

Mankind  learn  slowly  even  by  experience ;  therefore  the  ne- 
cessity of  "  line  upon  line  and  precept  upon  precept"       -      262 
Congress  should  interpose  the  authority  of  the  nation,  to  pre^ 
serve  the  People  from  imminent  danger  and  impending 
ruin  --_.---      264 


CONTENTS. 


CHAPTER  XL. 


Page 


Indirect  Taxation  by  collections  of  Customs,  Duties,  and  Im- 
posts, are  more  oppressive,  but  generally  less  offensive  to 
the  People  than  direct  Taxation     -  -  -  -      267 

An  illustration  of  the  difference  between  Indirect  and  Di- 
rect Taxation  -  -  -  -  -  -      268 

Remarks  upon  the  Suspension  of  the  Bank  of  England  271 

On  the  Currency  to  be  produced  by  Free  Banking    -  -      280 

CHAPTER  XLI. 

SAFETY     FUND. 

The  Safety  Fund  Principle  adapted  to  Free  Banking  -      290 

CHAPTER  XLII. 

On  the  New-York  General  Banking  Law  -  -      293 

CHAPTER  XLIII. 

The  balance  of  trade  and  uncurrent  money    -           -           -      306 
Of  the  importance  of  a  knowledge  of  Currency  to  Legisla- 
tures   324 

CHAPTER  XLIV. 

On  annual  Legislation  upon  forms  of  Government,  or  upon 
Currency      -------      354 


DEDICATION. 


TO  ALL  YOUNG  MEN  WHO  DESIRE  TO  PERPETUATE  REPUBLICAN 
INSTITUTIONS  IN  THE  UNITED  STATES. 

In  dedicajing  to  you  this  "  Republican  Free  Banking 
System,"  the  Author  feels  the  same  pleasure  that  an  honest 
iiiithful  servant  feels  when  he  presents  his  master  with  a 
grain  of  valuable  choice  seed,  which  he  has  cultivated,  and 
with  which  he  hopes  to  see  his  master*s  grpunds  occupied, 
and  his  master  thereby  permanently  enriched. 

He  dedicates  to  you,  young  men,  because  you  are  strong, 
L.  and  appointed  under  Heaven  ere  long  to  guide  the  desti- 
nies of  the  innumerable  millions  that  are  to  occupy  the  lar- 
gest continent  on  the  globe. 

He  honestly  believes  that  he  herewith  presents  you  with  a 
grain  of  pure  republicanism,  \vhich  may  be  made  a  staple 
product  of  America  if  cultivated  with  your  care  and  in- 
dustry, and  reared  under  your  vigilant  superintendance. 

Anti-republican,  arisr6cratic,  incorporated  banking  com- 
panies have  rendered  currency  a  calcareous  stone  in  the 
granite  arch  of  the  republican  edifice. 

If  you  desire  to  perpetuate  republican  institutions  in  the 
United  States ;  if  you  have  studied  the  political  history  of 
our  country,  and  become   thoroughly  acquainted  with  the 


10  DEDICATION. 

elementary  principles  of  our  government ;  andif  you  Lave 
made  yourselves  familiar  with  political  and  public  economy, 
after  you  have  read,  thoroughly  investigated,  pondered  and 
reflected  in  your  own  mmds  upon  the  republican  free  bank- 
ing system  herewith  dedicated  to  you,  the  author  may  rely 
with  implicit  confidence  upon  your  rendering  a  verdict  in  its 

favor. 

He  is  proud  to  subscribe  himself, 

Young  Men, 

Your  most  obedient  servant, 

THE  AUTHOR. 


PREFACE. 


The  present  state  of  the  monetary  atfairs  of  the  United 
States — the  contraction  of*  liabiHties  in  a  foreign  country — 
the  sale  of  State  Bonds  and  various  public  stocks  in  the 
Enghsli  market — tlie  withdrawal  of  specie  from  circulation — 
the  advance  of  the  price  of  exchanges  on  London — the 
high  rate  of  domestic  exchanges  between  the  different 
parts  of  the  Union — tlie  increasing  importations  of  foreign 
merchandize  upon  credit,  without  the  prospect  of  corres- 
ponding exportations — the  frequent  expansions  and  con- 
tractions of  the  issues  of  cliartered  banks,  and  their  repeat- 
ed suspensions  of  specie  payments,  their  dependence  upon 
legislative  enactments  for  relief)  for  new  charters,  and  for 
an  increase  of  bank  capital  stock — the  substitution  of  bank 
paper  for  capital — the  inundation  of  the  country  with  small 
unauthorized  bills,  circulating  as  money — the  increasing 
action  and  extension  of  an  unlimited  credit  system — and 
the  instability  of  public  opinion  upon  the  subject  of  cur- 
rency, by  which  laws  for  the  suppression  of  small  bills,  or 
for  preventing  bank  suspensions,  loudly  called  for  by  the 
people  at  one  time,  at  another  time  becoming  inoperative  ; 
each  and  all  of  these  causes,  having  separately  and  con- 
jointly occasionally  produced  fluctuations  in  money — com- 
mercial embarrassments — instability  in  business — as  well 
as  a  propensity  to  gambling  in  stocks,  in  money,  in  commodi- 


12  PREFACE. 

ties,  and  in  lands  ;  also,  political  excitement  at  the  election 
of"  the  Chief  Magistrate — a  depravity  of  moral  sentiment 
and  feeling — an  absence  of  moral  honor  and  honesty  in  the 
conduct  of  the  monetary  and  financial  affairs  of  the  coun- 
try, must  have  attracted  the  attention  of  all  Americans  with 
well  constituted  minds,  who  are  not  interested  in  the  con- 
tinuation of  the  present  defective  currency  and  its  abuses — 
convincing  them  that  there  must  be  something  radically 
wrong  in  tlie  elementary  principles  of  the  paper  portion  of 
the  currency,  as  at  present  furnished  by  chartered  banking 
companies,  to  admit  of  such  repeated  expansions  and  con- 
secutive contractions  of  the  currency,  and  to  induce  them  to 
cast  about  in  their  mind's  eye  for  some  new  system  of  cur- 
rency better  ada]3ted  to  the  genius  of  the  American  people, 
ns  well  as  to  existing  values  and  contracts  both  at  home  and 

abroad. 

Reflections  upon  this  condition  of  our  financial  curi-ency 

and  public  economy,  and  an  anxious  desire  to  promote  the 
peace,  prosperity  OTid  good  government  of  the  Union,  have 
induced  the  author  to  take  advantage  of  the  present  tran- 
quility of  the  country,  while  it  is  free  from  external  alarm, 
or  impending  domestic  political  excitement,  to  offer  to  re- 
publican America,  a  crude  undigested  system  of  currency, 
composed  in  part  o^  the  precious  metals,  and  in  part  of 
large  bills,  mutually,  perfectly  interchangeable  for  each 
other,  giving  eacJi  person  the  kind  of  currency  he  desires, 
by  the  preference  that  each  class  of  society  will  have  for 
that  kind  of  currency  least  desirable  to  the  other. 

The  mechanic  and  laborer  will  prefer  the  precious  met- 
als to  bank  notes,  from  their  greater  convenience  in  making 
small  payments,  as  well  as  from  their  less  perishable  char- 
acter by  fire,  or  by  time,  and  especially  from  their  lessen- 
ed danger  of  depreciation  from  political  or  financial  chang- 


PREFACE.  13 

es ;  wKile  the  commercial  man  and  large  dealer  will  pre- 
fer bank  paper  equally  current  throughout  the  United 
States,  perfectly  convertible  into  specie  at  the  counter 
where  it  was  issued,  to  the  precious  metals,  from  its  less 
labor  of  counting  and  less  expense  of  transportation  from 
market  to  market. 

The  author  has  recommended  a  centralized  government 
of  the  currency,  to  obtain  the  benefits  to  the  currency  of  a 
United  States  Bank,  and  a  profitable,  permanent  invest- 
ment of  capital,  with  a  perfectly  divided  and  indcpendmt 
administration  of  the  currency,  like  the  administration  of 
townships,  safely  to  guard  against  the  justly  apprehended 
danger  of  the  concentration  of  such  an  immense  monetary 
power  in  the  hands  of  a  few  interested  individuals,  wheth- 
er foreigners  or  Americans — 

That  every  section  of  the  country  may  be  accommoda- 
ted with  all  the  facilities  of  bank  convenience,  and  each  in- 
dividual enjoy  his  ja«t  share  in  the  regulation  of  the  paper 
portion  of  the  currency,  in  the  same  manner  that  he  enjoys 
the  right  of  regulating  common  schools,  as  well  as  to  have 
it  convenient  to  use,  at  par  at  all  times,  the  kind  of  currency 
he  prefers,  whether  it  be  gold  and  silver,  or  current  con- 
vertible   bank  paper ; 

To  prevent  the  inconvertibility  of  bank  paper,  he  re- 
commends the  separation  of  tlie  bank  of  issue  from  banks 
of  discount  and  deposit  ;• 

To  remove  private  interest  from  influencing  the  direc- 
tors of  the  banks  of  discount,  either  in  their  discounts,  loans 
or  dividends,  they  are  to  be  precluded  from  discounting  any 
note  or  acceptance  in  which  a  director  of  a  bank  may  be 
interested  ; 

To  guard  against  over-expansions,  discounts  are  to  be 
confined  to  actual  business  paper,  having  but  short  periods 


14  PREFACE. 

to  run,  to  the  amount  of  bills  issued  by  the  bank  of  issue, 
and  never  to  exceed  three  times  the  amount  of  specie  ac- 
tually in  the  vaults  of  the  bank  at  the  time  of  the  discount ; 

Removing  credit  from  currency,  by  not  allowing  the 
issue  of  paper  to  circulate  as  money  upon  public  bonds, 
notes  of  other  banks,  or  other  public  or  private  evidences  of 
debt,  or  foreign  or  domestic  exchanges,  or  aught  save  a  due 
proportion  of  gold  and  silver  ; 

Removing  the  influence  of  politics  from  the  currency, 
by  superceding  the  necessity  of  legislative  interference  in 
the  incorporation  of  new  banks,  or  the  extension  of  powers 
and  privileges  to  old  ones  ; 

Rendering  the  currency  republican,  by  the  free  election 
of  the  directors  of  the  banks  by  those  pei'sons  immediately 
and  directly  interested  in  the  currency  of  the  place,  in  the 
same  manner  as  they  elect  the  most  numerous  branch  of 
their  legislatures. 

This  plan  of  a  currency,  next  to  its  being  always  con- 
vertible and  uniformly  current  throughout  the  Union,  is 
most  valuable  as  being  calculated  to  encourage  domestic 
manufactures,  and  prevent  the  over-importation  of  foreign 
merchandize. 

This  must  appear  evident  from  the  fact,  that  every  man 
wishes  to  have  money  plenty  in  his  own  place,  and  will 
have  it  so  whenever  it  is  left  entirely  to  his  own  choice. 
Consequently,  the  interests  of  the  directors  will  be  the 
same. 

If  the  West  imports  less  foreign  merchandize  from  the 
East,  the  East  will  import  less  from  Europe. 

Banks  will  loan  their  money  to  the  manufacturer  and 
fair  trader  of  the  place,  as  well  for  the  common  interest  of 
the  place,  as  because  these  men  can  exercise  an  influence 
upon  the  election  of  directors  ;  who,  having  no  direct  in- 


PREFACE.  15 

terest  in  the  dividends,  will  no  longer  lend  large  sums  to 
foreign  speculators  to  obtain  the  repayment  in  a  foreign 
place,  to  enhance  the  profits  of  the  bank,  because  a  loan  of 
$50,000  to  a  speculator  lessens  their  means  of  lending  to 
one  hundred  men  $500  each,  while  the  votes  and  influence 
of  these  one  hundred  men  at  the  next  election  must  out 
number  that  of  one  speculator. 

This  would  soon  reduce  our  imports  to  the  par  exchange 
of  our  exports ;  facilitate  the  payment  of  our  foreign, 
commercial,  state  stock,  and  bank  stock  debts  ;  aid  in  the 
completion  of  the  immense  works  of  internal  improve- 
ment that  have  already  commenced  without  the  means  of 
their  completion  ;  giving  new  life  and  activity  to  business, 
and  additional  stimulus  to  laudable  American  enterprise, 


NOTICE  OF  THE  PLAN  OF  CURRENCY. 


The  Autlior  proposes  to  render  the  paper  portion  of*  the 
currency  republican  ;  always  perfectly  convertible  at  sight 
at  tiie  counter  where  it  was  put  in  circulation  ;  equally  cur- 
rent throughout  tlie  Union,  and  as  easily  to  be  obtained  as 
any  other  commodity. 

To  accomplish  this,  he  proposes  removing  from  the  cur- 
rency the  inliuence  of  j^:;?7'i'a^e  ?We?*e.S'^,  of  credit^  and  o^iml- 
I  tics — centralizing  the  govei-nmcnt  of  the  currency,  divi- 
ding its  administration,  and  making  each  bank  of  discount 
independent — separating  the  bank  of  issue  from  the  banks 
of  discount — limiting  the  discounts  to  not  more  than  three 
times  the  amount  of  specie  actually  in  the  vaults  of  the  bank 
at  the  time  of  the  discount,  and  to  the  amount  of  bills  fur- 
nished in  blank  to  the  banks  of  discount  by  the  bank  of  is- 
sue— confining  the  supply  to  the  actual  demand  for  curren- 
c}',  by  restricting  the  discounts  to  actual  business  paper, 
having  but  short  periods  to  run — allowing  the  free  exportation 
of  specie  as  the  only  effectual  means  of  preventing  over- 
trading and  over-importing — issuing  no  small  bills,  that  all 
the  small  channels  of  circulation  may  be  filled  with  the  pre- 
cious metals,  as  well  as  to  furnish  small  dealers  with  the  me- 
talic  currency  of  their  choice,  and  large  dealers  with  large 
current  convertible  bills  for  their  convenience,  by  the  prefer- 
ence of  each  class  of  community  for  that  kind  of  currency 
least  desirable  to  the  other. 


IS  NOTICE  OF  THE  PI.AN  OF  CURRENCT. 

To  separate  currency  from  politics.  Let  Congi-ess  or- 
ganize the  people  throughout  the  Union  for  financial  pur- 
poses, as  they  are  at  present  organized  for  townsliip  and 
for  state  political  purposes;  authorizing  them  to  elect  the 
directors  of  all  the  banks,  both  of  issue  and  of  discount,  in 
tfie  same  manner  as  they  elect  the  most  numerous  branch  of 
the  legislature. 

Let  the  people  throughout  the  Union  elect  directors  of  a 
United  States  Bank  :  whose  duty  it  shall  be  to  ascertain 
the  amoimt  of  specie  in  the  country,  and  the  amount  of  cur- 
rency required  for  the  permanent  prosperity  of  the  coun- 
try ;  to  issue  blank  bank  bills  upon  so  much  of  the  specie  as 
shall  appear  to  be  necessary  to  increase  the  amount  of  cur- 
rency to  the  actual  demand  foj-  the  convenient  interchange 
of  the  commodities  of  the  country;  and  to  apportion  the 
specie  and  bills  between  the  several  states,  in  |)ro]iortion  to 
their  several  demands  for  the' same. 

Let  the  electors  of  each  state  elect  directors  of  state 
banks,  to  apportion  the  specie  and  bills  furnished  by  the 
United  States  Bank  of  issue,  to  such  parts  of  each  state  as 
require  banks  of  discount  located  in  them,  and  to  take  a 
general  supervision  of  the  same. 

Let  the  electors  of  tlie  several  cities,  towns  and  districts, 
where  a  bank  of  discount  is  required  to  be  located,  elect  di- 
rectors of  the  same,  who  shall  give  good  security  for  the 
faithful  discharge  of  their  duties,  and  who  shall  only  dis- 
count actual  business  paper,  having  but  short  periods  to  run, 
and  in  which  discount  no  director  lias  any  interest. 

The  people  being  thus  organized  ;  the  directors  account- 
able for  their  conduct,  and  precluded  from  any  interest  in 
the  discounts — their  hope  of  re-election,  their  salaries,  and 
their  securities*  bonds,  will  make  it  their  private  as  well  as 
public  interest,  to   promote  the   public    good  only- — there 


NOTICE  OP  THE  PLAN  OF  CURRENCY.  ]9 

would  be  no  longer  any  occasion  for  legislative  interference 
with  banks  and  currency.  Tims  currency  may  be  sejw/fi- 
ted  from  private  hiterest,  and  fiom  politics;  rendered 
strictly  convertible,  unitbrrniy  current  throughout  the  Union, 
and  as  republican  as  our  I'eligion  or  literature. 

The  centralization  of  the  govemment  of  the  currency, 
will  render  the  bills  as  current  throughout  the  Union  as 
would  be  the  notes  of  an  incorporated  United  States  JSank 
and  branches  ;  while  the  divided  and  independent  adminis- 
tration of  the  currency  removes  the  financial  and  political 
evils  of  the  centralized  administration,  that  must  by  the 
laws  of  its  situation,  attend  an  incorporated  United  States 
Bank. 

The  government — the  capital  stock — the  specie  received 
for  the  sale  of  stock — tlie  issue  and  apportionment  of  the 
specie  and  bills— the  profits — the  safety  fund — the  divi- 
dends— the  forms  of  business-— of  keeping  accounts  and 
of  making  returns  for  publication,  are  to  be  centralized  ; 
while  the  election  of  the  directors  of  the  banks  of  discount — 
their  sureties  for  the  faithful  discharge  of  their  duties — the 
disco  ant  of  notes  and  acceptances — the  collection  of  their 
debts — the  publication  of  their  monthly  reports — and  all 
the  ordinary  business  of  a  bank  of  discount,  must  be  as  di- 
vided and  independent  of  the  government  of  currency,  as 
the  election  of  the  officers  and  administration  of  the  affairs 
of  the  townships  are  separate  and  distinct  from  the  govern- 
ment of  the  Union. 

The  election  of  the  directors  of  banks  by  the  persons  in- 
terested in  the  loans  and  business  of  the  bank  and  the  sound- 
ness of  the  currency,  will  change  the  character  and  busi- 
ness of  the  banks,  by  giving  the  loans  of  the  bank  equally 
to  the  fair  traders  of  the  place,  instead  of  being  loaned  in 
large  sums  exclusively  to  a  few  speculators — as  the  fair 


20  NOTICE  OF  THE  PLAN  OF  CUKRENCY. 

traders  of  the  place  will  exercise  tlie  most  influence  in  the 
election  of  directors.  .  This  will  retain  the  money  in  the 
place,  and  most  effectually  lessen  over-trading;  institute  a 
Ijond  of  union  between  the  citizens  and  government  of  this 
country  upon  the  all-powerfal  jDrinciple  of  self-interest, 
equal  to  that  which  supports  the  government  of  Great 
Britain  in  the  bond  of  private  Interest  found  in  the  national 
debt,  without  any  of  its  concomitant  evils. 

The  stock  would  be  the  most  profitable,  safe  and  perma- 
nent investment  in  the  United  States,  if  not  in  the  world  ; 
being  cash  in  hand  when  capital  is  required,  and  money  at 
interest  at  all  times,  by  its  being  always  saleable  in  the 
money  market,  as  are  the  funded  debts  of  England  and 
Atoerica.  The  bill  holder  \vould  be  perfectly  secure  from 
loss  from  failures  of  banks,  or  the  depreciation  of  the  cur- 
rency ;  nor  would  the  public  be  subjected  to  the  evils  at- 
tendant upon  their  expansions  and  contractions  ;  the  con- 
vertibility of  the  notes  certain  beyond  doubt,  and  the  bank 
paper  portion  of  the  currency  equally  current  throughout^ 
the  Union.  In  short,  this  system  of  banking  must  place 
the  paper  portion  of  the  currency,  (being  based  exclusive- 
ly upon  the  precious  metals,)  upon  an  equality  with  gold 
and  silver. 

A  judicious  modification  of  the  usury  laws,  and  appro- 
priate bankrupt  laws,  must  make  money  as  easily  to  be 
obtained  as  any  other  commodity )  reduce  our  imports 
to  the  par  exchange  of  our  exports,  and  render  the  cur- 
rency of  the  country  the  key-stone  of  the  arch  of  this 
republic. 


INTRODUCTION. 


The  author,  while  chairman  of  the  committee  of  Finance 
in  the  Parliament  of  Upper  Canada,  in  1835,  was  deputed 
by  a  resolution  of  the  House  of  Assembly,  to  travel  in  the 
United  States  and  elsewhere,  during  the  recess  of  Parlia- 
ment, to  obtain  information  upon  various  subjects  of  public 
economy,  and  to  report  to  the  House  the  result  of  his 
research  at  the  next  meeting  of  Parliament. 

Among  the  subjects  of  his  enquiry  were  exchanges, 
linance,  currency  and  banking. 

While  in  the  United  States,  he  was  very  politely  fur- 
nished with  every  facility  necessary  to  the  accomplishment 
of  the  object  of  his  mission,  by  political  economists,  finan- 
<^.iers,  bankers  and  merchants;  by  the  members  of  the  admin- 
istration, as  well  as  by  those  out  of  office,  and  opposed  to 
the  administi'ation  of  the  day. 

The  result  of  his  enquiry  upon  the  subject  of  banking 
was,  a  thorough  conviction  of  the  anti-republican  tendency 
of  incorporated  banking  companies,  and  a  confirmation  of 
his  opinion,  previously  expressed  in  a  report  made  to  the 
House  of  Assembly  during  the  previous  session,  by  a  com- 
mittee of  eleven  members  appointed  upon  the  subject  of 
currency  and  banking,  of  which  he  was  chairman.  The 
object  of  that  committee  was,  to  ascertain  whether  any  bet- 
ter system  of  furnishing  paper  to  circulate  as  money,  to 
supply  the  deficiency    of  the  precious    metals,    than  that 


22  INTRODUCTION. 

afforded  by  the  chartered  bank  system,  could  be  devised. 
The  committee  reported  in  favor  of  giving  the  people  the 
divided  administration  of  the  currency,  and  centralizing  the 
government  of  the  paper  intended  to  circulate  as  money, 
with  the  view  of  separating  currency  from  politics,  and  re- 
moving from  the  control  of  the  administration  of  the  govern- 
ment the  administration  of  the  currency;  preventing  its 
centralized  monopoly'  in  commercial  transactions  and  its 
political  aristocratic  tendency.  The  dissolution  of  Parlia- 
ment by  Sir  Francis  Bond  Head,  ihe  official  influence,  bri- 
bery, corruption,  and  cunning  trickery,  with  the  force  and 
violence  of  organized  bands  of  Orangemen,  had  recourse 
to  by  the  executive  government  at  the  subsequent  election, 
to  obtain  the  return  of  a  tory  Parliament,  induced  the  re- 
formers of  Upper  Canada  to  depute  the  author  to  London, 
to  lay  before  His  Majesty's  government  and  the  Imperial 
Parliament,  the  manner  in  which  the  executive  government 
of  the  Province  had  destroyed  the  elective  franchise  in  that 
Province,  and  rendered  the  House  of  Assembly  the  mere 
tools  of  the  executive  government,  a  mere  shield  to  their 
nefarious  and  ruinous  measures  :  believing  that  if  His  Ma- 
jesty's government  was  fully  and  correctly  informed  of  the 
grievances  of  the  country,  and  the  manner  in  which  the 
people  had  been  unjustly  defrauded  of  their  constitutional 
rights  and  privileges,  that  His  Majesty  would  order  a  new 
election  of  the  House  of  Assembly,  free  from  the  exercise 
of  bribery  and  corruption,  or  of  intimidation  on  the  part  of 
the  executive  government  of  the  Province ;  or  direct  the 
administration  of  the  government  of  the  Province  to  be 
conducted  according  to  the  constitutional  act  of  the  Pro- 
vince, making  the  Executive  Council  responsible  to  the  peo- 
ple through   the  House  of  Assembly,  after  the  manner  in 


INTRODUCTION.  23 

which  His  Majesty's  Ministers  of  the  Crown  in  England 
are  responsible  to  the  House  of  Commons. 

The  insurrection  near  Toronto,  under  Mr.  McKenzie, 
with  which  the  author  was  totally  ignorant  until  after  the 
defeat  of  the  Patriots — the  order  of  the  government  for  his 
arrest  and  execution — the  collection  around  him  of  his 
friends,  and  their  offer  to  defend  him — their  voluntary  sepa- 
ration upon  his  advice  and  recommendation,  and  his  return 
to  his  native  country,  the  United  States,  prevented  him 
from  completing  and  publishing  the  plan  of  currency  and 
banking  herewith  presented  to  the  people  of  the  United 
States. 

His  experience  for  the  last  few  years,  and  observations 
of  the  defective  workings  of  the  chartered  bank  paper 
currency  of  the  United  States,  has  more  than  ever  confirm- 
ed him  in  the  belief,  that  there  is  something  radically  wrong 
in  the  fundamental  principles  of  the  currency,  produced 
by  the  issues  of  incorporated  banking  companies,  whether 
they  be  incorporated  by  the  Congress  of  the  United  States, 
or  by  the  legislatures  of  the  several  States. 

The  repeated  suspensions  of  specie  payments  by  the  in- 
corporated State  banks  of  the  United  States — the  fluctua- 
tions of  the  currency,  and  frequent  inconvertibility  of  bank 
notes — the  expense  and  inconvenience  attending  the  ma- 
king remittances  from  one  part  of  the  Union  to  another — as 
well  as  the  high  rate  of  exchanges  with  commercial  Europe 
against  the  United  States,  are  beginning  to  attract  great 
attention  in  Europe  as  well  as  in  the  United  States. 

The  thinking  portion  of  the  American  people  with  well 
constituted  minds,  who  are  not  interested  in  the  present 
system  of  incorporated  banks,  and  not  influenced  by  politi- 
cal party  prejudices,  but  who  are  honestly  desirous,  by 
every  means  in  their  power,  of  promoting  the  peace,  pros- 


24  INTRODUCTION. 

perity  and  good  government  of  the  United  States,  are  be- 
ginning to  feel  and  understand  that  there  must  be  some- 
tliing  radically  wrong  in  the  elementary  principles  of  cur- 
rency and  banking,  as  practiced  and  conducted  in  the  Uni- 
ted States,  to  admit  of  such  frequently  repeated,  wild  and 
delusive  expansions  of  the  currency  and  its  ruinous  con- 
secutive contractions. 

If  the  fundamental  principles  of  the  currency  were  cor- 
rect, the  sagacity  and  cunning  ingenuity  of  **  Yankee  specu- 
lators would  have  invented  "  a  remedy  for  its  defective  ope- 
rations. 

Changes  in  the  currency  have  frequently  been  attempted 
by  the  Congress  of  the  United  States,  as  well  as  by  the 
Legislatures  of  the  different  States — sometimes  with  a  view 
to  its  permanent  uniform  perfect  convertibility — sometimes- 
with  the  intention  of  rendering  it  generally  current  through- 
out the  Union  ;  but  more  frequently  with  the  hope  of  in- 
creasing the  quantity  of  the  circulating  medium,  without 
the  expense  and  difficulty  of  increasing  the  amount  of  the 
precious  metals,  upon  which  alone  a  permanent  increase  of 
the  money  currency  can  ever  be  rationally  expected  to  be 
effected.  But  all  these  changes  have  failed  in  converting 
credit  into  cash. 

Small  banking  companies  have  been  formed  in  the  hope 
of  supplying  villages  and  inland  towns  with  money,  w^hen 
the  inhabitants  were  unable  to  obtain  loans  from  the  banks 
of  the  large  cities.  Banks  have  been  incorporated  with 
large  capitals,  in  the  expectation  that  the  credit  of  an  im- 
mense banking  capital  would  be  a  safe-guard  against  panics, 
and  enable  the  institution  to  support  its  business  against  the 
most  unfavorable  currents  of  trade.  But  the  discounting 
fictitious  paper,  that  is,  any  paper  not  actual  business  paper 
having  but  short  periods  to  run,  soon  exhausted  their  funds, 


rNTRODUCTION.  25 

and  compelled  the  contractions  of  their  issues,  with  its 
usual  disastrous  consequences  ;  arid,  although  each  of  these 
plans  may  have  succeeded  for  a  time,  yet,  as  they  extended 
their  issues  beyond  their  specie  basis,  the  large  as  well  as 
the  small  banks,  ultimately  disappointed  the  expectations 
of  their  adherents. 

The  projectors  of  these  institutions  appear  to  have  lost 
sight  of  the  first  and  all-powerful  elementary  principles  of 
political  economy,  by  which  currency  and  banking  are  uni- 
formly governed  :  That  the  demand  and  supply  always 
regulate  the  value  of  gold  and  silver,  as  well  as  of  all 
other  commodities;  that  the  free  exportation  of  specie  is 
the  only  certain  mode  of  effectually  preventing  over-  tra- 
ding and  over-importing ;  that  credits,  whether  large  or 
small,  and  whether  made  by  many  small  institutions,  or  by 
one  large  one,  must  be  paid  soonei-  or  later  ;  tliat  bank  pa- 
per is  no  more  capital,,  than  the  shoe-maker*s  promises  to 
make  yo'ir  shoes,  are  shoes  ;  that,  at  best,  it  is  but  the  rep- 
resentative of  coin,  and  cannot  perform  all  the  functions  of 
coin  ;  that  they  who  borrow  money,  and  spend  more  than 
their  incomes,  must  become  impoverished,  while  they  who 
earn  more  than  they  spend,  must  accumulate  wealth  ;  that 
the  party  who  lends  money  safely,  and  receives  the  interest 
thereof,  becomes  rich,  while  he  who  borrows  money  and 
pays  interest,  becomes  poor,  all  other  things  being  equal. 

Over  issues  of  bank  paper,  with  the  unerring  certainty  of 
fate,  will  sooner  or  later  bring  about  corresponding  contrac- 
tions, with  their  ruinous  and  disastrous  consequences.  The 
banks  fill  the  channels  of  circulation  to  overflowing :  the 
natural  effects  of  which  is  the  exportation  of  the  surplus.. 
Bank  notes  not  being  exportable,  they  are  returned  upon 
the  banks  for  specie  for  exportation. 

Over  issues  of  bank  paper  produce  advanced  prices  for 


2B  INTRODUCTION. 

foreioTi  mereliandlze  ;  this  leads  to  increased  importations 
and  the  exportation  of  specie.  With  this  diminution  of 
specie,  generally  occurs  a  diminution  of  public  confidence  : 
with  the  diminution  of  its  credit  and  its  specie  means,  are 
lessened  its  ability  to  discount  paper,  and  lend  money,  with 
an  increased  necessity  for  calling  upon  its  debtors  for  pay- 
ment. This  produces  a  general  pressure  for  money.  High 
rates  of  interest  are  demanded  by  the  few  who  have  money 
to  lend.  Brokers  are  making  splendid  fortunes  ;  bankers 
are  sharing  in  the  spoils  of  their  usurious  extortions,  while 
universal  ruin  pervades  the  land.  Bankruptcies,  failures, 
suspensions  of  specie  payments  by  the  banks,  and  suspen- 
sions of  business  by  the  commercial  community,  follow  in 
their  train. 

The  enriching  of  the  few,  and  the  ruin  of  the  many,  are 
the  usual  and  universal  consequences  of  over  issues. 

HISTORY  OF  THE  FIRST  BANKS. 

The  first  bank  established  in  the  United  States,  was 
chartered  by  Congress  on  the  31&t  day  of  December,  1781, 
with  a  capital  of '$10,000,000,  without  limitation  of  dura- 
tion. This  charter  was  confirmed  by  the  legislature  of 
Pennsylvania  in  1782;  and  in  1785,  its  excesses  and  rurnr 
ous  effects  upon  business  had  become  so  apparent,  that  the 
legislature  revoked  its  state  charter.  The  bank,  however, 
tad  already  become  too  strong  for  public  opinion.  Disre- 
garding the  revocation  of  its  charter  by  the  State  of  Penn- 
sylvania, it  prosecuted  its  business  under  its  United  State* 
charter  until  1787,  when  it  was  re-chartered  by  the  State 
of  Pennsylvania,  its  capital  limited  to  $2,000,000,  Q:nd  time 
limited  to  14  years. 

ROBERT  MORRIS. 

^he  Chicago  Democrat  says,.  "  Robert  Morris,  the  mai^ 


INTRODUCTION.  29 

to  whose  financial  operations  our  country  in  the  revolution- 
ary struggle  is  said  to  owe  as  much  as  to  the  negotiations 
of  Franklin,  or  the  arms  of  Washington,  passed  the  latter 
years  of  his  life  in  prison,  confined  for  debt, — a  victim  to 
the  banking  system,  which  he  was  among  the  first  to  estab- 
lish in  America.  Rich  in  early  life,  he  embarked  in  a 
series  of  speculations,  which  rendered  him  hopelessly  in- 
solvent. In  1780,  he  established  a  bank  by  subscription, 
in  which  his  share  was  c£iO,000,  for  the  express  purpose  of 
supplying  the  army  with  3,000,000  rations  and  300  hogs- 
heads of  rum. 

"  The  following  year,  the  bank  of  North  America  super- 
ceded this  bank,  and  eventually  led  its  stockholders  into 
speculations,  which  proved  their  ruin,  and  great  detriment 
to  the  country  at  large." 

THE  HISTORY  OF  BANK  SUSPENSIONS. 

The  first  suspension  of  specie  payment  by  the  banks  of 
the  United  States,  was  in  1814,  (all  previous  suspensions 
had  been  called  failures.)  This  occurred  soon  after  the 
capture  of  Washington,  the  Capitol  of  the  United  States, 
by  the  British.  The  battle  of  Bladensburg  was  on  the  24th 
of  August,  and  on  the  27th  of  the  same  month,  the  banks 
of  Baltimore  suspended  specie  pa;yment,  which  was  follow- 
ed by  the  banks  of  Philadelphia  on  the  30th,  and  those  of 
New  York  on  the  1st  September  following.  This  suspen- 
sion, however,  had  for  apology  the  exigencies  of  the  times. 
It  occurred  during  a  great  National  struggle,  in  which  the 
defenders  of  the  American  flag  and  of  the  National  honor, 
had  to  contend  with  a  powerful  foreign  foe,  and  the  hostile, 
secretly  growing,  aristocratic  chartered  banking  companies 
of  the  several  States. 

After  the  resumption  of  specie  payments  by  the  banks  in 


^^mmmsm^^^wi!'^^ 


28  INTRODUCTION. 

1817,  the  public  mind  began  to  repose  with  implicit  confi- 
dence in  the  efficiency  of  incorporated  banks  ;  hoping,  that 
under  the  vigilance  of  legislative  supervision,  with  salutary 
restrictions,  they  might  serve  to  furnish  the  public  with 
paper  to  circulate  as  money  to  meet  the  deficiency  produ- 
ced in  the  circulating  medium  by  the  exportation  of  the 
precious  metals. 

But  the  second  suspension,  which  commenced  in  New 
York  on  the  10th  May,  1837,  and  which  extended  east  and 
west  with  the  rapidity  of  **  wild  fire,*'  for  it  was  followed 
by  the  suspension  of  the  banks  of  Philadelphia  on  the  11th, 
and  by  the  banks  at  Boston  and  Baltimore  on  the  12th,  and 
with  but  few  exceptions  by  all  the  banks  in  the  Union, 
with  telegraphic  succession.  This  suspension  shocked  the 
cautious,  and  nearly  overturned  the  confidence  of  the  most 
faithful  bankites,  for  it  had  not  the  apology  of  the  dangers 
of  an  external  foe,  that  surrounded  them  in  1814. 

This  suspension  occurred  in  a  time  of  profound  peace 
and  unprecedented  general  prosperity  ;  at  a  time  tooj 
when  the  public  Treasury  had  just  been  lavishly  pouring  its 
millions  of  yellow  ore  into  the  laps  of  flourishing  wealthy 
states  ;  when  commerce,  agriculture,  and  internal  improve- 
ments, were  making  rapid  strides  to  an  unlimited  exten- 
sion ;  when  banks  were  vieing  with  each  other  in  their  liber- 
ality of  discounts,  and  glorying  in  the  amount  of  their  divi- 
dends, bonuses,  and  bank  profits,  until  bank  notes  were 
more  plenty  than  any  other  commodity  professing  to  pos- 
sess value.  At  this  joyous  moment,  the  tocsin  wrung  the 
knell  of  departed  prosperity  in  sounds  that  stunned  the  ear, 
and  spoke  in  words  that  congealed  the  blood  of  those  who 
heard  them:  The  banks  have  suspended  specie  payment. 

This  suspension  gave  American  credit  an  alarming  shock, 
both  at  home  and  abroad:  all  was.  consternation  and  dis- 


INTRODUCTION.  29 

may  in  the  money  market ;  yet,  the  buoyancy  of  Ameri- 
cans, their  enterprising  resistless  "go  ahead"  character, 
and  their  confiding  dispositions,  added  to  their  cupidity,  in- 
spired them  with  fresh  confidence  in  new  and  better  bank 
promises. 

The  legislatures  of  the  states  incorporated  new  banks, 
and  increased  the  amount  of  the  capitals  of*  the  old  ones, 
"  with  new  and  important  salutary  restrictions,  checks  and 
balances."  But  hope  had  hardly  become  confidence,  be- 
fore the  public  mind  was  a  second  time  exasperated  at  the 
alarming  report,  that  the  banks  of  Philadelphia  had  sus- 
pended specie  payments  again.  This  occurred  on  the  9th 
of  October,  1839.  The  legislature  of  Pennsylvania  au- 
thorised their  suspension  and  continuance  of  business  until 
the  15th  of  January,  1841 ;  at  which  time  they  were  re- 
quired to  resume  specie  payments  or  forfeit  their  charters. 

The  banks  in  the  several  states  have  been  so  long  and 
so  often  indulged  by  legislative  interference  in  their  favor, 
and  have  obtained  such  strong  hold  upon  American  credit, 
and  American  business,  that,  like  a  spoiled  child,  they  have 
very  little  to  fear  from  the  indignation  of  indulgent  parents, 
who  have  already  transferred  to  them  their  domicils  from 
Maine  to  Georgia. 

Many  of  the  southern  and  western  states,  through  the 
agency  of  their  banks,  have  registered  their  mortgages  in 
trans-atlantic  cities,  by  the  sale  of  public  bonds  and  debts 
of  their  respective  states,  in  foreign  markets. 

Credit  has  assumed  the  character  of  capital^  and  extend- 
ed its  dominion  over  the  valley  of  the  Mississippi,  a  coun- 
try of  immense  wealth  and  importance,  until  their  bank 
paper  (with  the  exception  of  that  of  Missouri,)  is  far  below 
par. 


30  INTRODUCTION. 

Is  it  at  all  surprising  that  men  should  loose  confidence  in 
institutions  that  are  unable  or  unwilling  to  redeem  their 
promises  to  pay,  in  times  of  peace  and  plenty  1  Yet  few 
will  deny,  that  chartered  bank  paper  no  longer  commands 
public  confidence. 

I  am  aware  of  the  dislike  that  most  men  have  to  hearing 
the  truth,  when  it  interferes  with  their  interests  or  inclina- 
tions. The  prophets  of  truth  were  formerly  frequently 
stoned  to  death,  while  flatterers,  false  prophets,  liars  and 
deceivers,  were  richly  rewarded. 

Legislatures,  to  suit  all  their  constituents,  find  it  neces- 
sary to  pass  almost  as  many  amendatory  as  original  laws. 
Their  having  once  exceeded  the  true  business  of  legisla- 
ting, that  oiproviding  for  iJie  protection  of  persons  and  prop- 
erti/f  has  laid  the  foundation  for  much  injurious,  local,  spe- 
cial and  private  legislation.  We  have  by  far  too  much  le- 
gislation— affirmative,  contradictory  and  explanatory ;  and 
upon  no  subject,  perhaps,  has  this  been  more  severely  felt 
than  upon  that  of  banking. 

Currency  being  an  instrument  for  the  transfer  and  ex- 
change of  commodities  from  man  to  man,  passing  freely 
from  hand  to  hand,  should  be  equally  adapted  to  the  use 
and  convenience  of  all.  While  it  is  confined  to  its  legiti- 
mate objects,  a  large  portion  of  it  may  as  well  be  composed 
of  paper,  at  all  times  perfectly  convertible,  and  uniformly 
current,  as  of  gold  and  silver.  In  some  situations,  such 
paper  money  possesses  advantages  over  the  precious  met- 
als, on  account  of  its  fitness  for  remittances  in  large  sums, 
as  well  as  a  saving  in  expense  of  material  and  manufacture 
for  circulation.  But  the  moment  currency,  whether  com- 
posed of  the  precious  metals  or  of  promises  to  pay,  assumes 
any  other  character  than  that  of  a  medial  commodity  and  a 
measure  of  values,  it  looses  its  usefulness,  and  produces 
deleterious  effects  upon  commerce  and  exchanges. 


INTRODUCTION.  31 

If  currency  assumes  to  be  capital,  and  unites  with  credit 
to  augment  its  powers,  the  currency  becomes  first  inflated 
and  then  depreciated  in  value  ;  the  channels  of  circulation 
become  surcharged,  and  consequently  the  exportation  of 
the  precious  metals  must  ensue,  while  this  variable  state  of 
the  currency  renders  it  unfit  for  the  measure  of  all  values. 

To  obviate  all  these  evils,  organize  the  people  to  transact 
their  own  business  of  money  making  ;  their  money  will 
then  be  composed  of  such  materials  as  the  majority  of  the 
people  require,  and  of  such  denominations  as  best  suit  the 
convenience  of  either,  and  all. 

Legislatures  should  no  more  interfere  with  currency  than 
with  religion.  The  people,  being  the  sovereign  power, 
should  be  so  organized  by  the  congress  of  the  United 
States,  as  to  be  able  to  regulate  the  paper  portion  of  the 
currency  of  the  country,  as  the  directors  of  the  Mint  are  to 
manage  the  coinage  of  the  precious  metals ;  and  as  inde- 
pendently of  any  legal  enactment,  beyond  that  of  their  or- 
ganization by  the  Congress  of  the  United  States,  as  the  in- 
habitants of  the  townships  are,  who  elect  their  town  oflficers 
to  transact  the  whole  business  of  the  township,  indepen- 
dent of  the  Provincial  legislatures,  or  of  the  Congress  of  the 
United  States,  beyond  the  laws  of  their  organization.  Or, 
in  other  words,  the  administration  of  the  currency  should 
be  as  perfectly  isolated  and  independent  of  the  government 
of  the  currency,  as  is  the  administration  of  the  townships 
independent  of  the  Provincial  or  General  governments ; 
while  the  government  of  the  currency  should  be  an  unit  as 
perfectly  centralized  as  the  government  of  the  mint,  or  the 
general  government  of  the  United  States. 

The  author  has  endeavored  to  show  that  money,  banking, 
finance,  currency,  and  exchanges,  are  all  subjects  easily  to 
be  understood,  when  stript  of  the  mystery  with  which  they 


Z2  INTRODUCTION. 

are  intentionally  involved  by  the  persons  interested  in  the 
secrecy  of  the  trade.  That,  for  this  purpose,  a  little  plain 
common  sense  is  all  that  is  necessary  to  the  understanding 
of  the  science  of  money,  if  the  subject  be  clearly  descri- 
bed. No  argument  is  necessary  to  convince  any  man  who 
has  an  American  eagle,  or  an  American  dollar  in  his  hand, 
that  he  holds  money. 

The  author  has  endeavored  to  familiarize  the  subject  to 
the  most  common  understanding,  by  illustrations  plain  and 
easily  to  be  comprehended,  as  the  following  description  of 
exchanges  and  balances  of  trade  will  show. 

It  requires  very  little  learning  to  comprehend,  that  if  a 
man  sells  commodities  to  an  amount  greater  than  the  amount 
for  which  he  purchases  merchandize,  he  will  have  a  balance 
due  to  him,  which  he  may  take  home  with  him  in  specie,  or 
he  may  give  any  other  person  an  order  to  receive  the  money. 
For  the  sake  of  illustrating  the  subject,  we  will  call  this 
order  a  bill  of  exchange.  Now  if  a  man  sells  less  com- 
modities in  the  market  than  the  amount  of  the  merchandize 
he  purchases,  he  will  owe  a  balance  in  the  market.  This 
he  must  remit  money  to  pay,  or  he  must  purchase  an  order 
from  some  man  who  has  a  balance  due  to  him  in  that  mar- 
ket. This  order  then,  is  better  for  the  man  who  has  the 
remittance  to  make  to  pay  the  balance  of  his  overtrading 
than  the  money  ;  because  the  expense  of  transportation, 
insurance,  &c.  to  the  place  where  the  business  has  been 
transacted,  is  a  less  expensive,  as  well  as  a  more  certain  re- 
mittance ;  while  the  cash  in  hand  is  better  to  the  man  who 
has  a  balance  due  to  him  from  a  foreign  market,  when  he 
wants  to  use  the  money  at  the  place  where  he  is,  by  the 
amount  of  the  expense  of  freight,  risk,  and  use  during  the 
time  that  must  elapse  before  he  could  receive  it,  should  he 
order  its  immediate  shipment  for  the  place  where  he  is. 


INTRODUCTION,  33 

The  merchant  in  New  York,  therefore,  is  willing  to  receive 
one  ounce  of  pure  silver,  or  one  ounce  of  pure  gold,  or  their 
equivalents  in  standard  gold  and  silver,  for  a  draft  on  his 
agent  in  London  for  an  ounce  of  pure  gold  or  an  ounce  of 
pure  silver,  or  their  equivalents  in  standard  gold  and  silver, 
in  London,  or  in  the  place  where  his  money  is  due  ;  while 
the  buyer  of  the  bill  will  willingly  give  him  in  hand  an 
ounce  of  pure  gold,  or  an  ounce  of  pure  silver,  or  their 
equivalents  in  standard  gold  and  silver,  for  the  same  amount 
in  London,  or  the  country  where  he  owes  the  debt ;  since 
the  bill  of  exchange  will  save  him  the  expenses  attendant 
upon  the  exportation  of  specie  to  pay  his  foreign  debt. 
This  is  the  state  when  the  balance  of  trade  is  equal,  and 
the  exchange  at  par :  both  the  buyer  and  seller  of  the  bill 
of  exchange,  make  one  or  more  per  cent,  in  the  saving  of 
the  expense  of  the  two  transhipments,  that  is,  one  tranship- 
ment each.  But  should  two  men  purchase  a  similar  amount 
above  the  amount  of  their  sales,  they  would  each  one  of 
them  leave  a  balance  due  against  himself,  equal  to  the 
amount  that  was  due  in  the  market  to  the  man  who  had 
sold  more  than  he  had  bought.  It  is  plain  that  only  one 
of  these  men  could  buy  a  bill  of  exchange  to  the  amount  of 
his  indebtedness  in  London,  as  that  was  the  whole  amount 
due  to  any  person  in  the  United  States;  and  consequently 
the  other  debtor  must  export  specie  to  meet  the  demand 
against  him.  As  each  debtor  would  desire  to  purchase  this 
bill  of  exchange,  the  price  of  bills  of  exchange  would  rise 
to  nearly,  or  perhaps  quite  the  expense  of  exporting  spe- 
<jie  ;  that,  as  there  could  not  be  bought  what  did  not  exist, 
there  would  not  be  bills  of  exchange  in  market  to  but  half 
the  amount  of  indebtedness  of  them  both :  hence  it  is 
=clear,  that  the  balance  of  trade  will  be  readily  indicated  by 


84  INTRODUCTION. 

the  rate  of  exchange,  when  that  is  not  interfered  with  by 
banks  or  other  artificial  causes. 

The  author  has  also  endeavored  to  show,  that  so  long"  as 

o 

the  precious  metals  are  interchangeable  for  paper  money, 
the  inflation  of  the  currency  by  bank  paper,  reduces  the 
value  of  the  precious  metals  equally  with  that  of  the  paper 
money  ;  this,  however,  only  becomes  sensible  when  the 
paper  ceases  to  be  convertible,  at  which  time  the  deprecia- 
tion appeal's  upon  the  paper  only.  The  gold  bill,  (howev- 
er expedient  its  passage  might  have  been,)  by  which  the 
quantity  of  pure  gold  in  an  eagle  was  lessened,  while  the 
legal  value  continued  the  same  ;  although  it  apparently 
raised  the  value  of  gold  to  the  value  of  silver,  yet,  in  fact, 
it  reduced  the  value  of  silver  just  as  much  as  it  appeared 
to  have  raised  the  value  of  gold.  This  also  is  indicated  by 
the  exchanges. 

The  author  has  endeavored  to  show,  that  state  chartered 
bank  paper  wants  some  of  the  essential  requisites  of  a 
money  currency.  That  of  being  invariably  convertible 
into  specie  at  sight ;  that  of  a  uniform  current  circulation 
throughout  the  Union,  and  an  entire  independence  of  le- 
gislation :  while  the  circulation  of  small  bank  bills  drives  the 
specie  out  of  circulation,  from  its  natural  tendency  to  with- 
draw from  domestic  circulation  and  to  become  exported. 
These  evils  he  professes  to  have  traced  to  the  connection 
of  currency  with  private  interest,  with  credit,  and  with 
politics.  To  remove  these  evils,  he  has  recommended  the 
organization  of  the  people  by  congress,  in  such  a  manner 
as  to  enable  them  to  elect  the  directors  of  the  bank  as  inde- 
pendently as  they  elect  their  township  officers.  Preclu- 
ding these  directors  from  any  interest  in  the  loans  or  divi- 
dends of  banks,  and  requiring  them  to  give  good  security 
for  the  faithful   discharge  of  well  defined  duties ;  separa- 


INTRODUCTION.  35 

ting  the  bank  of  issue  from  the  banks  of  discount,  and  re- 
stricting their  discounts  to  actual  business  paper,  having  but 
short  periods  to  run,  and  to  three  times  the  amount  of  specie 
actually  in  the  vaults  of  the  bank  at  the  time  of  the  discount ; 
centralizing  the  government  of  the  bank,  the  disposal  of  the* 
stock  and  dividends,  and  dividing  the  administration  of  the 
currency  to  suit  the  interests  or  inclinations  of  the  sovereign 
people. 

The  author  recommends  that  there  should  be  no  bills 
issued  of  a  less  denomination  than  circulate  in  foreign  coun- 
tries with  which  we  are  commercially  immediately  connec- 
ted, or  at  the  least,  not  less  than  twenty  dollar  notes,  that 
men  in  small  business  may  have  specie  if  they  choose  it, 
and  commercial  men  may  have  large  bills  if  they  prefer 
them. 

To  lessen  the  expense  of  producing  the  bills  intended  for 
circulation  as  money,  he  recommends  that  the  directors  of 
the  United  States  Bank  should  procure  plates  to  be  engra- 
ved and  bills  to  be  printed  and  executed  in  blank,  in  tke  best 
manner  possible,  to  avoid  counterfeits,  ;^o  many  and  such 
bills  of  the  various  denominations,  not  less  than  tw^cnty 
dollars,  as  shall  be  necessary  for  circulation  throughout  the 
United  States  for  the  convenient  interchange  of  commodi- 
ties ;  and  that  the  directors  of  the  United  States  institution 
shall  reserve  from  the  profits  of  the  several  banks  of  dis- 
count, a  sum  to  constitute  a  safety  fund,  to  be  applied,  ac- 
cording to  their  discretion,  to  the  prompt  and  temporary 
relief  of  any  casualties  that  may  occur  to  any  banks  of  dis- 
count, by  which  they  might  be  unabled  to  meet  their  liabili- 
ties at  the  instant. 

He  recommends  a  centralized  government  of  the  curren- 
cy, with  the  view  of  rendering  it  equally  current  through-. 


2^  INTRODUCTIOJV. 

out  the  Union,  with  a  divided  administration ;  giving  each 
bank  of  discount  perfect  independence  in  the  conduct  of  it& 
own  affairs,  to  avoid  the  financial  and  political  influence  of 
such  an  immense  monetary  power  as  an  United  States  bank 
and  branches  must  possess.  The  capital  stock,  the  specie  re- 
ceived in  payment,  the  stock,  the  profits  made  by  the  banks 
upon  the  paper  portion  of  the  currency,  the  expenses  of 
conducting  the  currency,  the  reserved  funds,  the  dividends, 
and,  in  short,  the  entire  government  of  the  currency  are  to 
be  centralized,  and  made  to  constitute  one  perfect  whole  r 
while  the  business  and  administration  of  the  banks  of  dis- 
count are  local,  and  perfectly  independent  of  each  other,, 
and  of  the  bank  of  issue.  Hence,  the  evils  liable  to  attend 
the  accumulation  of  an  immense  monetary  power  and  influ- 
ence that  must  accompany  an  incorporated  United  States 
bank  are  obviated. 

The  bank  of  issue,  in  the  proposed  plan,  stands  in  the 
same  relation,  in  many  respects,  to  the  banks  of  discounts 
that  capitalists  do  to  the  banks  of  discount  they  employ  for 
the  purpose  of  lending  their  money ;  with  this  principal 
difference,  that  capitalists  only  authorize  their  directors  to 
lend  the  actual  specie  deposited  with  them,  while  the  Uni- 
ted States  bank  of  issue  deposites  blank  bank  notes  to  three 
times  the  amount  of  specie  deposited,  that  the  paper  may 
be  executed  and  loaned,  and  the  specie  used  for  the  re- 
demption of  their  notes,  as  that  may  occasionally  be  re- 
quired. 

The  bank  of  England  lends  or  sells  its  notes  to  the  banks 
of  discount  of  England  ;  they  neither  loan  cash,  nor  their 
own  notes,  generally,  but  the  notes  of  the  bank  of  Eng- 
land. 

After  the  United  States  bank  directors  have  procured, 
engraved  and  executed  by  the    officers,  numbered  and  re- 


INTRODUCTION.  37 

gistered  in  blank,  and  delivered  to  the  directors  of  the  sever- 
al state  institutions,  the  amount  intended  to  be  put  in  circu- 
lation in  their  states  respectively,  the  state  bank  directors 
are  to  execute  the  bills  as  directors  of  the  state  banks,  and 
apportion  them  with  one-third  part  of  their  amount  in  spe- 
cie, between  the  banks  of  discount  in  the  several  cities, 
towns,  and  districts  of  the  states.  The  people  of  these 
several  localities  having  elected  directors  of  their  banks  of 
discount,  and  these  directors  having  given  sufficient  security 
for  the  faithful  discharge  of  their  duties,  and  the  prompt 
payment  over  to  their  successors  in  office  of  all  monies 
and  property  of  the  bank  in  their  hands,  may  execute 
the  bills  appointed  to  them,  to  put  in  circulation,  and  loan 
them  upon  the  discount  of  actual  business  paper,  having 
but  short  periods  to  run,  in  which  no  director  has  an  inter- 
est. Thus  dividing  the  administration  of  the  currency  and 
centralizing  its  government ;  rendering  it  republican,  free 
from  credit,  and  from  politics  ;  equally  current  throughout 
the  Union,  and  always  strictly  convertible  into  specie  at  the 
counters  where  it  is  issued. 

The  monthly  publications  of  the  statements  of  the  banks 
will  enable  the  people  to  judge  of  the  propriety  and  economy 
with  which  each  bank  is  conducted,  and  to  approve  or  dis- 
approve of  the  same  through  the  ballot  boxes. 

The  author  has  attempted  to  show,  that  currency,  money, 
medial  commodity,  and  circulating  medium,  signifying  the 
precious  metals  and  paper  money  of  the  country,  whether 
composed  of  gold  and  silver,  bank  notes,  state  scrip,  post 
notes,  private  individual  notes,  or  other  paper  in  the  simili- 
tude of  bank  notes,  intended  to  circulate  as  money,  is  the 
instrument  of  measure  of  the  value  of  all  other  commodi- 
ties, as  strictly  as  the  established  weight  of  the  pound  is  the 
measure  of  the  weight  of  an  article  that  is  bought  and  sold 


38  INTRODUCTION. 

by  'weight,  or  the  established  length  of  the  yard  the  meas- 
Tire  of  the  materials  bouglit  and  sold  by  cloth  measure.  Its 
value  then  ought  to  be  governed  by  the  same  laws  as  gov- 
ern weights  and  measures.  It  should  be  equally  as  immu- 
table and  unchangeable  as  they  are,  so  far  as  this  property  of 
money  is  considered,  But  money  has  also  another  prop- 
erty, that  of  being  the  instrument  of  transfer,  interchange, 
and  communication  of  capital  and  commodities  between 
man  and  man,  by  which  capital  is  transferred ;  and  other 
commodities,  through  this  instrument,  are  converted  into 
capital,  and  conveyed  from  man  to  man,  and  from  place  to 
place.  Hence  it  is  seen  to  be  a  similar  instrument 
of  the  communication  of  capital,  that  books  and  news- 
papers are  of  knowledge.  Books  and  newspapers  are 
not  knowledge,  nor  is  money  capital :  they  are  both 
only  the  instruments  by  which  their  respective  prop- 
erties are  communicated.  Money  is  not  used  as  capital 
by  any  nation  on  earth,  any  more  than  the  square  bits  of 
metal,  which  constitute  the  currency  of  the  Chinese,  or  the 
currency  composed  of  shells  of  savage  nations,  except  in 
the  manufacture  of  gold  and  silver  articles. 

Capitalists  use  money  only  as  the  most  convenient  form 
in  which  wealth  can  be  kept,  or  transmitted  from  place  to 
place,  and  ve>ted  in  productive  capital  for  the  purchase  of 
materials,  provisions,  payment  of  laborer's  wages,  &c.  ne- 
cessar .  to  the  conducting  of  any  business  they  may  prose- 
cute. 

The  precious  metals  are  used  by  the  manufacturers  of 
gold  and  silver  wares  or  ornaments,  as  capital,  in  the  same 
manner  as  the  blacksmith  uses  iron  and  steel.  And  gold 
and  silver  may,  from  this  cause,  possess  their  own  peculiar 
values,  regulated  by  the  supply  and  demand  of  them  for 
aaanufasturing  purposes..     But,  as  this  demand  has  never 


INTRODUCTION.  39 

been  such  as  to  raise  their  price  above  their  current  value 
as  a  circulating  medium,  that  may  not  have  any  very  mate- 
rial influence  upon  their  value  for  currency. 

The  importance  of  currency  as  the  instrument  of  com- 
munication, or  transfer  of  capital  from  man  to  man,  and 
from  place  to  place,  may  not  inaptly  be  illustrated  by  its 
comparison  with  the  instruments  or  vehicles  of  communica- 
tion between  distant  places,  as  steam-ships,  vessels,  steam- 
cars,  waggons,  and  carts.  They  are  the  instruments  that 
convey  capital  from  place  to  place,  but  they  arc  not 
capital  to  those  who  hire  them,  unless  when  the  owner  sends 
them  into  market  to  be  sold  and  left,  or  exchanged  for 
money  or  for  capital ;  which  will  not  be  likely  to  be  the 
case,  unless  the  channels  in  which  they  are  employed  are 
surcharged  with  the  commodity  of  which  they  are  compo- 
sed :  that  is,  the  carter,  who  uses  his  cart  to  transfer  capital 
from  place  to  place,  does  not  leave  his  cart  with  the  load  ; 
nor  does  the  captain  of  a  ship,  sell  and  leave  his  vessel  in 
the  market  with  his  cargo,  unless  the  channels  of  commerce 
are  surcharged,  and  the  foreign  demand  for  the  vessel  is 
greater  than  the  value  of  the  vessel  to  him  in  the  traxie  in 
which  he  is  engaged.  But,  when  the  waggoner  has  more 
waggons  or  carts,  than  the  business  in  which  he  is  engaged 
requires,  he  will  sell  not  only  his  freight,  but  the  instrument 
by  which  that  freight  was  brought  to  market;  so  the  cap- 
tain of  a  vessel,  when  there  are  more  ships  employed  in  the 
trade  in  which  he  is  engaged^  than  can  find  profitable  car- 
goes, will  sell  his  vessel,  and  invest  the  value  of  it  in  some 
other  capital  that  he  believes  likely  to  be  more  productive  : 
so,  too,  will  specie  only  be  exported  when  the  channels  of 
currency  are  surcharged,  and  the  demand  for  the  instru- 
ment, money,  in  some  other  business  in  another  country  offers 
prospects  of  more  profitable  returns  than  that  in  which  it 
is  at  present  employed. 


40  INTRODUCTION. 

Hence,  it  is  clear,  that  money,  like  the  books  of  a  circu- 
iating  library,  like  carts  and  waggons,  like  steam  cars  and 
vessels,  is  only  the  instrument  of  the  transfer  of  capital, 
and  not  capital,  any  more  than  books  are  knowledge,  or 
than  carts  or  vessels  are  cargoes  and  freight. 

The  proposed  system  of  currency  claims  the  merit  of 
furnishing  a  uniform  medial  commodity  for  circulation, 
equally  current  throughout  the  union  ;  a  centralized  govern- 
ment of  the  currency,  and  all  the  beneficial  effects  of  a 
United  States  bank,  with  a  divided  administration  of  the 
currency  ;  and,  consequently,  free  from  the  evils  and  dan- 
gers aprehended  from  tlie  accumulation  and  concentration 
of  the  whole  money  power  of  the  United  States  in  one 
company,  or  the  private  interest,  credit  power,  and  conse- 
cutive expansions  and  contractions  of  the  paper  portion  of 
the  circulating  medium  issued  by  incorporated  state  banks. 
It  separates  the  bank  of  issue  from  the  banks  of  discount ; 
removes  credit  and  private  interest  from  both,  and  regu- 
lates the  issues  by  the  actual  demand  for  circulating  medium 
and  the  amount  of  specie  in  the  United  States.  Limits  the 
loans  of  the  banks  of  discount,  to  the  amount  of  bills  appor- 
tioned to  them  for  circulation  by  the  banks  of  issue.  Re- 
stricts their  discounts  to  not  exceeding  three  times  the 
amount  of  specie  actually  in  the  vaults  of  the  banks  at  the 
time  of  the  discount,  instead  of  discounting  paper  and  lend- 
ing money  thereon  to  three  times  the  amount  of  the  paid-up 
capital  of  the  banks,  as  is  some  times  done  by  chartered 
banks,  even  when  their  deposites,  independent  of  their  cir- 
culation, may  exceed  twice  the  amount  of  specie  in  their 
vaults  ;  and  confines  the  lending  of  their  notes  wholly  to 
the  discounting  of  actual  husincss  papeVy  having  but  short 
periods  to  run.  This  prevents  the  inflation  of  the  curren- 
cy, and  consequently  its  ruinous    contractions,   with  their 


INTRODUCTION.  41 

disastrous  consequences.  It  separates  the  currency  of  the 
country  from  politics,  by  removing  the  necessity  of  legis- 
lative interference  witli  the  circulating  medium,  by  the 
chartering  banking  companies,  increasing  their  capital 
stock,  or  renewing  their  charters — thereby  lessening  the 
dangerous  political  excitement  that  not  unfrequently  ac- 
companies the  election  of  the  Chief  Magistrate — while  it 
furnishes  all  classes  of  community  with  the  kind  of  money 
they  require.  Issuing  bills  of  no  smaller  denominations 
than  twenty  dollars,  that  the  mechanic,  farmer  and  laborer, 
who  prefer  specie  to  paper  money,  may  receive  it  from  that 
preference ;  and  that  the  large  trader,  who  prefers  large 
notes,  may  find  no  difficulty  in  obtaining  them  for  cash,  at 
par,  when  he  requires  them  for  commercial  purposes.  It 
secures  the  perfect  convertibility  of  the  paper  portion  o  f 
the  currency,  by  limiting  the  discounts  to  actual  business 
paper,  having  but  short  periods  to  run,  and  by  restricting 
the  amount  to  the  demand  for  a  circulating  medium,  pas- 
sing from  hand  to  hand,  and  by  being  based  exclusively 
upon  the  precious  metals  actually  in  the  vaults  of  the  banks 
at  the  time  of  the  discount.  It  renders  the  currency  repub- 
lican, like  the  other  elementary  principles  of  the  govern- 
ment, by  giving  the  people  in  every  part  of  the  Union  the 
election  af  the  directors  of  the  bank  of  issue  ;  and  the 
people  in  each  state  the  election  of  the  directors  of  state 
banks  of  secondary  issue ;  and  the  people  of  the  cities, 
towns,  and  districts,  where  banks  of  discount  are  to 
be  located,  the  election  of  the  directors  of  the  banks 
of  their  respective  places,  as  they  elect  the  most  nu- 
merous branch  of  their  legislatures.  It  does  not,  like  char- 
tered banking  companies,  convert  credit  paper  into  capital, 
nor,  by  uniting  itself  to  credit,  inflate  the  currency  beyond 
its  proper  limits ;  nor  does  it  allow  the  directors  the  exclu- 


42  INTRODUCTION. 

sive  right  to  have  their  notes  firstly  discounted,  if  they  re- 
quire it :  for  it  expressly  precludes  the  directors  from  any 
interest,  either  directly  or  indirectly,  in  the  loans  or  dis- 
counts of  the  banks.  It  applies  the  currency  of  the  country 
to  its  legitimate  object,  that  of  passing  from  hand  to  hand, 
and  being  the  necessary  instrument  of  the  transaction  of  the 
regular  business  of  the  place,  by  making  it  exclusively  the 
interest  of  the  directors  to  accommodate  their  constituents, 
by  discounting  only  actual  business  paper,  having  but  short 
periods  to  run,  instead  of  discounting  fictitious  notes  of 
speculators,  who,  from  their  large  capital  or  bank  credit, 
have  frequently  been  able  to  monopolize  the  money  of  the 
place,  and  thereby  to  establish  the  market  price  of  its  ex- 
portable commodities  ;  inducing  the  grower  and  producer 
to  believe  that  such  speculators  actually  advance  the  price 
of  their  products,  when,  in  fact,  they  frequently  fix  tlie 
price  of  the  commodities,  in  which  they  deal,  below  what 
the  regular  traders  of  the  place  would  have  paid,  had  the 
money  of  the  place  been  left  open  and  free  for  their  ac- 
commodation, and  the  purchase  of  the  commodities  left  to 
a  fair  competition.  Yet,  as  these  speculators  have  all  the 
money  that  the  banks  can  lend,  the  farmers  are  induced  to 
give  them  credit  for  what  they  term  "  the  advantage  of  the 
opposition  in  the  market."  But,  even  if  this  spirit  of  specu- 
lation should  produce  temporarily  an  advance  in  the  price 
of  some  products,  the  farmer  is  not  always  benefitted  by 
such  temporary  rise  in  the  commodity  above  its  real  intrin- 
sic value,  when  many  other  commodities  are  reduced  in 
value  in  the  same  proportion. 

A  fair,  uniform  price,  for  the  various  products  cf  the 
country,  is  far  better  for  the  private  interest  of  the  grower 
or  producer,  as  well  as  for  the  permanent  prosperity  of  the 


INTRODUCTION.  43 

country,  than  occasional  high  prices,  to  be  followed  by  cor- 
responding low  prices  of  the  same,  or  other  commodities  of 
exportation.  It  holds  out  no  inducement  to  the  directors  of 
banks  to  interfere  with  the  exchanges,  either  domestic  or 
foreign  ;  freely  allowing  the  rate  of  exchange  to  indicate 
the  balance  of  trade,  and  the  free  exportation  of  specie  to 
check  over-trading  and  over-importing.  Leaving  the  or- 
dinary exchange  transactions  to  individual  competition ; 
which  must  establish  the  market  rate  of  exchange  in  the 
United  States,  as  it  does  in  all  other  countries  in  the  world  ; 
and  as  it  must  invariably  do,  when  it  is  not  interfered  with 
by  banks  or  other  artificial  means.  It  promotes  laudable 
enterprise,  encourages  industry  and  economy,  by  render- 
ing the  currency  sound,  always  convertible  into  specie 
where  it  is  put  into  circulation,  and  equally  current  through- 
out the  Union.  It  facilitates  commercial  transactions,  by 
inducing  promptitude  and  punctuality  in  meeting  liabilities, 
and  reduces  the  amount  of  our  imports  to  the  par  exchange 
of  our  exports.  It  provides  the  means  of  lessening  the 
difficulties  with  which  the  several  states  have  to  contend, 
which  have  become  involved  abroad  for  funds  vested  in 
unproductive  enterprizes,  or  have  commenced  greater  and 
more  extended  works  of  internal  improvements  than  they 
have  funds  to  accomplish,  by  lessening  the  price  of  ex- 
changes with  the  diminution  of  the  amount  of  our  imports, 
and  by  encouraging  and  promoting  domestic  manufactures  ; 
the  directors  having  their  interest  promoted  by  the  pros- 
perity and  satisfaction  of  the  community  in  the  loans  of  the 
bank,  and  by  equalizing  the  currrency  throughout  the 
Union. 


AN    ESSAY 

ON 

BANKING,  CURRENCY,  FINANCE,  EXCHANGES, 

AND 

POLITICAL   ECONOMY. 


r 


CHAPTER  I. 

ON  THE  STATE  OF  THE  CURRENCr  OF  THE  UNITED  STATES. 

Gold  and  Silver  a  small  part  of  the  currency — Convertible  State  chartered  bank 
paper  a  large  amount — Inconvertible  bank  paper  a  still  larger  amount — Post 
Notes,  State  Scrip,  Notes  of  other  Stites,  unauthorized  private  Notes,  Checks, 
Doposite  Notes,  and  Notes  of  Corporations  and  Associations,  comprise  the  largest 
portion  of  the  currency. — Small  bills  injurious  to  the  issuer  as  well  as  to  the  bill 
holder — Causes  explained. 

The  currency  of*  the  United  States  consists  of  a  small 
amount  of  gold  and  silver  coins  and  bullion;  a  larger  amount 
of  state  chartered  bank  notes  exchangeable  for  specie  ;  a 
far  larger  amount  of  bank  notes  not  convertible  into  specie, 
composed  of  the  notes  of  non-specie  paying  banks,  the 
notes  of  banks  of  other  states,  unauthorized  paper  of  indi- 
viduals, of  companies,  and  of  associations,  in  the  similitude 
of  bank  notes,  issued  and  circulated  as  money ;  which, 
with  post  notes,  deposite  notes,  checks,  state  scrip,  and 
bills  of  exchange,  comprise  most  of  the  medial  commodity 
of  the  United  States. 

£ 


46  DUNCOMBE*S    FREE    BANKING. 

And,  althougli  the  constitution  expressly  provides,  that 
nothing  but  gold  and  silver  shall  be  made  a  tender  in  the 
payment  of  debts  in  the  United  States,  yet,  the  issue  of 
small  bills  by  chartered  banks,  and  the  consequent  abstrac- 
tion of  the  precious  metals  from  the  circulation,  has  left  the 
whole  business  of  the  country  to  be  conducted  by  paper 
money ;  which,  notwithstanding  the  salutary  and  positive 
provision  of  the  constitution  to  the  contrary,  has  become 
virtually  a  tender  in  the  payment  of  debts. 

Bills  compose  so  large  a  proportion  of  the  circulating 
medium,  that  those  who  will  not  take  them  in  payment  of 
their  debts  cannot  collect  their  dues,  nor  carry  on  business 
requiring  the  use  of  money. 

Bank  notes  of  small  denominations,  are  dangerous  to  the 
banks  that  issue  them,  as  well  as  to  the  currency.  They 
expose  the  currency  of  the  United  States  more  to  the  dan- 
gers of  over-expansion,  than  that  to  which  the  currencies 
of  most  of  the  countries  of  Europe  are  liable. 

The  five  pound  notes  of  the  bank  of  England  are  the 
smallest  credit  paper  issued  to  circulate  as  money,  with 
which  I  am  acquainted,  excepting  those  that  circulate  in 
America. 

The  injurious  effects  of  the  issue  and  circulation,  by  the 
banks,  of  small  bills,  have  been  severely  felt  in  every  part  of 
the  Union  ;  and  almost  every  state  has  in  turn  recorded  the 
opinion  of  its  legislature  against  it,  by  passing  laws  to  pre- 
vent their  circulation.  But  the  power  and  influence  of  in- 
corporated banking  companies,  aided  by  the  fluctuations  of 
currency  and  trade,  have  invariably  obtained  a  repeal  of 
those  salutary  laws,  or  rendered  them  nugatory.  The  good 
sense  and  intelligence  of  the  people  may,  however,  at  last 
prevail.  Congress  may  be  induced  to  organize  the  people 
throughout  the  Union,  simultaneously  to  suppress  the  cir- 


buncombe's  free  banking.  47 

culatlon  of  small  bills  ;  wlien  tlie  precious  metals  will  spon- 
taneously and  instantly  supply  their  place.  The  people, 
when  once  organized,  will  render  the  currency  republican, 
separate  it  from  credit,  from  private  interest,  and  from  poli- 
tics. 

The  efforts  of  state  legislators  to  correct  the  defects  of 
the  currency  must  ever  be  as  unavailing  as  their  attempts  to 
suppress  small  bills  have  hitherto  proved.  Their  actions 
are  desultory,  unconnected  and  temporary  ;  liable  to  the 
influence  of  private  interest,  or  political  party  feeling,  that 
may  vary  in  the  several  states,  and  prevent  their  uniform 
action.  All  the  states  cannot  be  expected  to  pass  similar 
laws  upon  this  subject,  simultaneously  ;  consequently,  the 
currency  might  be  changed  l)y  state  legislation,  but  it  could 
never  be  radically  reformed. 

Some  of  the  states  have  passed  laws  to  suppress  the  cir- 
culation of  small  bills  within  their  own  territories ;  but 
their  immediate  inundation  with  those  of  other  states,  often 
much  more  uncurrent  than  their  own  had  been,  aided  in 
obtaining  a  repeal  of  the  laws  for  their  suppression,  just  at 
the  moment,  perhaps,  when  the  neighboring  states,  from 
seeing  the  advantages  of  the  measure,  were  about  to  pass 
similar  laws. 

The  people  are  the  only  legitimate  source  from  which  to 
expect  permanent  and  radical  relief.  Congress  is  the  only 
proper  body,  possessing  legitimate  power  and  authority,  to 
organize  them  for  that  purpose.  When  there  are  no  small 
bills  in  circulation,  all  the  channels  and  ramifications  of  the 
currency  are  occupied  by  the  precious  metals  ;  so  that  upon 
any  sudden,  foreign  or  domestic,  political  or  financial  shock, 
those  channels  are  not  disturbed.  The  farmer,  mechanic 
and  laborer,  have  no  direct  interest  in  it.  In  fact,  the  spe- 
cie circulating  among  these  classes  may,  in  part,  be  brought 


48  DUNCOMBE^S  FREE  BANKING. 

into  general  circulation,  by  its  commanding  a  premium,  and 
thereby  materially  lessen  the  evils  of  the  contractions  of 
the  currency,  which  might  otherwise  have  been  necessary 
to  its  perfect  recovery.  But  when  small  bills  constitute 
the  whole  circulation  among  the  farmers  and  laboring  clas- 
ses, as  well  as  the  small  sums  they  have  laid  up,  the  panic 
is  augmented  by  their  general  rush  to  obtain  cash  for  their 
notes  ;  and  if  they  are  not  paid,  public  sympathy  is  warm- 
ly enlisted  in  their  favor.  Their  misfortunes,  and  the  frauds 
of  the  bank,  become  the  common  topic  of  conversation. 
The  evils  are  augmented,  and  the  reports,  that  loose  no- 
thing by  being  repeated,  are  highly  colored ;  the  pubHc 
mind  becomes  inflamed  ;  the  peace  and  good  order  of  so- 
ciety are  endangered,  as  well  as  the  safety  of  the  officers 
and  directors  of  the  bank. 

By  the  laws  of  their  situation,  chartered  banks  7mtst  in- 
flate the  currency,  and  make  it  subservient  to. their  interest 
by  every  means  in  their  power.  Contractions  must  always 
follow  over-expansions  :  suspensions  may  follow  them  oc- 
casionally. 

The  several  states  of  the  Union,  which  are  by  the  con- 
stitution expressly  prohibited  from  coining  money,  emitting 
bills  of  credit,  or  making  any  thing  but  gold  and  silver  a 
tender  in  the  payment  of  debts,  have,  by  legislative  enact- 
ments, made  a  great  variety  of  credit  paper  virtually  a 
tender  in  the  payment  of  debts.  If  state  scrip  is  not  a  bill 
of  credit,  it  ought  not  to  circulate  as  such. 

Currency  is  an  instrument  that  should  be  adapted  to  the 
use  of  every  citizen  equally.  The  merchant,  who  only  re- 
quires scissors  to  cut  up  his  broadcloth,  should  not  com- 
plain of  the  woodman,  because  he  requires  an  axe  in  clear- 
ing the  forest ;  nor  should  he  any  more  complain  of  the  far- 
mer, because  he  prefers  the  precious  metals  to  promises  to 


buncombe's  free  banking.  49 

pay  :  nor,  on  the  other  hand,  should  the  woodman  complain, 
of  the  merchant,  because  he  is  unwilling  to  use  an  axe 
for  cutting  up  his  broadcloths,  or  that  he  prefers  paper 
money  to  specie,  provided  it  be  strictly  convertible  and 
equally  current  throughout  the  Union^     / 


CHAPTER  II. 

STATE  CHARTERED  BANKS. 

On  the  trade  of  Banking— Banks  of  DepositP — Banks  of  Discount — Both  unpro- 
fitable to  tlio  proprietors. — St;,te  chartered  iiistitutious  comprise  these,  and  hanks 
of  issue  also — The  former  lend  moue\'— The  latter  lend  credit — Heuce,  the  prof- 
its of  hanks  of  circulation. 

Banks  of  deposite,  in  which  gold  and  silver  are  only 
safely  kept  for  the  proprietors,  to  be  weighed  out  by  their 
administrator,  upon  their  orders,  or  the  credit  on  the  books 
of  the  bank,  transferred  at  the  will  of  the  owners,  could 
not  be  profitable  to  the  proprietors  in  America;,  since  the 
expense  of  office  rent,  clerk  hire,  other  salaries,  and  contin- 
gent expenses,  would  be  liable  to  be  greater  than  any  in- 
crease of  profits  from  the  monopoly  of  the  trade,  by  the 
association  of  capitalists  in  the  bank ;  as  they  might  lend 
their  money  as  safely,  cheaply,  and,  perhaps,  as  profitably, 
themselves,  as  by  hired  agents. 

Banks  of  discount  are  institutions  possessing  a  capital  in 
money,  which  the  proprietors  lend  by  discounting  promis- 
sory notes,  bills  and  acceptances,  originating  in  the  sale  of 
merchandize,  or  other  commodities,  having  but  short  pe- 
riods to  run.  As  banks  of  discount  lend  only  money,  and 
not  their  credit,  the  profits  of  their  business,  above  the  or- 
dijoary  rate  of  interest,  would  not  support  the  expenses  oC 


50  buncombe's  free  banking. 

a  banking  house,  since  the  loans  could  be  made  at  less  ex- 
pense by  the  individuals  themselves,  than  by  officers  em- 
ployed for  that  purpose.  But,  supposing  it  would  pay  ex- 
penses whenever  the  market  price  of  money  was  below  its 
legal  rate  of  interest,  by  being  a  monopoly  of  the  business 
of  money  lending,  it  would  not  be  likely  to  be  established 
in  the  United  States,  where  much  more  profitable  invest- 
ments of  capital  can  daily  be  made. 

Banks  of  issue  and  circulation,  lend  only  their  credit ; 
which  they  do  by  discounting  endorsed  notes,  made  pay- 
able at  the  bank,  due  at  some  stated  period  or  periods  hence, 
for  the  accommodation  of  borrowers  of  credit,  who  are 
willing  to  pay  the  bank  for  the  loan  of  its  credit,  due  on 
demand  without  interest,  the  ordinary  rate  of  interest  for 
the  use  of  ready  money  ;  believing  they  can  purchase  bet- 
ter in  the  market  with  the  credit  notes  of  the  bank  that  is 
well  known,  than  they  could  with  their  own  notes  due 
sixty  days  hence.  They  also  transfer  credits  on  the  books 
of  the  bank,  and  receive  money  in  deposite,  which  they 
use  as  their  own.  So  long  as  their  credits  are  current, 
which  may  be  fbr  some  time,  provided  they  are  confined 
within  due  limits,  their  paper  may  be  a  convenience  to  the 
borrower  equal  to  their  charge  for  the  use  of  it.  These 
institutions,  it  is  clear,  must  be  highly  profitable  to  the  stock- 
holders ;  who  only  keep  as  much  specie  in  their  vaults  as 
may  serve  to  meet  the  demands  for  change,  or  for  the  con- 
venience of  their  customers. 

American  state  chartered  banks  ai*e,  by  law,  authorized 
to  exercise  all  the  powers,  privileges,  and  immunities  of 
these  three  kinds  of  banking.  They  receive  deposites ; 
discount  notes,  and  issue  their  own  bills. 

They  do  not,  however,  lend  the  money  deposited  with 
them.     They  lend  their  own  credit  notes,  and  retain  the 


buncombe's  free  banking.  51 

deposited  money  until  the  same  are  returned  upon  them  for 
redeiription  in  specie. 

They  lend  their  paper  money,  by  exchanging  notes  with 
their  customers.  The  borrower  giving  them  an  endorsed 
note,  payable  at  the  bank  at  some  future  period,  and  re- 
ceiving in  exchange  the  unendorsed  notes  of  the  bank,  due 
on  demand,  to  an  equal  amount,  mimis  the  discounted  in- 
terest on  the  note  of  the  borrower  for  the  time  it  has  to  run  ; 
the  borrower,  also  perceiving  that  he  can  purchase  merchan- 
dize and  other  commodities  better  in  the  market  with  the 
notes  of  the  bank  which  are  known,  than  he  can  with  his 
own  which  are  unknown,  and  which  the  law  prohibits  him 
from  making  in  the  similitude  of  bank  notes,  and  issuing 
'  or  circulating  as  money,  which  the  bank  may  legally  do, 
finds,  that  however  well  he  may  be  known,  the  notes  of  the 
bank  are  more  convenient  for  payments  in  small  sums  than 
his  own  could  possibly  be.  Some  discrepancy  in  the  work- 
ing of  the  machinery  of  an  American  bank  may  be  reason- 
ably expected,  since  the  incompatible  and  perfectly  distinct 
duties  of  these  three  different  institutions  are  blended  to- 
gether, and  all  subjected  to  the  direction  of  private  inter- 
est. Yet,  the  ingenuity  of  Americans  has  assimilated  them 
so  nearly  together,  and  the  public  mind  have  become  so 
familiar  with  the  terms  used  by  each  kind  of  banking,  that 
the  incongruous  parts  of  an  American  compound  bank 
appear  far  less  unnaturally  connected  than  they  really  are. 
Briefly  in  the  exercise  of  its  functions  as  a  bank  of  de- 
posite,  it  receives  for  safe-keeping  the  coin  and  bullion  of 
individuals,  and  transfers  upon  its  books,  by  checks  or 
drafts,  the  various  amounts  standing  to  the  credit  of  deposi- 
tors :  facilitating  commercial  transactions,  by  saving  the 
expenses  of  transportation  from  house  to  house,  the  labor 
of  repeated   countings,  the  wear  and  tear  of  the  precious 


52  buncombe's  free  banking. 

metals  by  friction,  and  the  cost  of  assurance,  or  the  trouble 
of  safe-keeping.  Here,  however,  the  similarity  of  a  bank 
of  deposite,  like  that  of  Hamburgh,  with  an  American 
bank  ceases.  The  chartered  bank  receives  the  deposites, 
as  was  remarked,  but  instead  of  keeping  them  subject  to 
the  direction,  checks  or  drafts  of  the  owners  of  the  credits 
on  the  books  of  the  bank,  it  deposites  them  among  its  own 
funds,  and  pays  them  out  upon  the  return  of  its  own  notes 
for  specie  ;  unless  it  be  in  certain  cases  where  deposites 
are  made  in  parcels  of  the  precious  metals  by  weight,  sub- 
ject to  the  disposition  of  the  depositor ;  in  which  case,  the 
American  bank  becomes  a  perfect  bank  of  deposite.  For 
this  safe-keeping,  &c.  the  depositor  may  be  required  to  pay 
a  small  sum. 

So  far  as  the  last  kind  of  deposites  are  made  in  the  bank^ 
they  exercise  no  influence  whatever  over  the  circulation  by 
expanding  or  contracting  the  amount. 

The  uniform  practice  of  American  bankers  is,  I  believe, 
to  put  the  deposites  into  the  vaults  of  the  banks  in  com- 
mon stock  with  their  own  specie,  and  bank  upon  the 
whole  amount ;  pay  it  out  in  the  redemption  of  their  own 
notes  ;  transfer  the  credits  on  the  books  of  the  bank  at  the 
will  of  the  depositor,  as  though  the  identical  bullion  was 
there,  and  ready  to  be  weighed  or  counted  out  by  tale,  to 
any  one  to  whom  the  transfer  might  be  made,  if  required. 
Hence,  it  has  not  unfrequently  happened,  that  independent 
of  their  own  circulation,  banks  have  received  deposites  and 
paid  them  out  in  the  redemption  of  their  own  notes,  until 
they  have  not  had  half  the  amount  of  their  deposites  in  spe^^ 
cie  remaining  in  their  vaults.  The  depositor  has  the  credit 
in  the  bank  ;  the  banker  discounts  notes,  and  lends  his  own 
paper  upon  his  right  to  the  deposite,  while  the  depositor, by 
drafts,  checks^  or  entries  on  the  books  of  the  bank,  transr 


rnXNCOMBE's    FREE    BANKING.  53 

fers  his  deposite  precisely  as  he  would  have  done  had  he 
reserved  it  exclusively  for  his  own  use  ;  in  which  case  the 
depositor  pays  for  the  safe-keeping  of  his  money,  while  the 
banker  may  pay  him  a  small  per  centage  for  the  use  of  the 
deposite,  so  long  as  it  is  allowed  to  remain  in  the  bank. 

It  appears  by  the  report  of  the  Secretary  of  the  Treas- 
ury of  the  United  States,  in  1840,  that  there  was  deposited 
in  the  several  banks  of  the  United  States,  $75,696,857, 
while  at  the  same  time,  the  amount  of  specie  in  the  vaults 
of  the  banks,  was  only  $33,105,155.  Where  then  is  the 
secui-ity  of  the  bill-holder,  in  case  of  a  panic  and  run  upon 
the  bank  ] 

The  specie  in  the  vaults  of  the  banks  is  actually  less 
than  one  half  of  the  amount  of  the  deposites  ;  all  of  which 
may  be  demanded  of  the  bank,  in  specie,  at  the  shortest 
notice.  And  this  is  the  currency  of  the  United  States  ! — 
the  paper  that  circulates  as  money ! — assumes  the  place 
expressly  ordained  by  the  constitution  to  the  precious 
metals !  If  not  legally,  yet  virtually  and  practically,  by 
displacing  the  precious  metals,  it  has  become  a  tender  in 
the  payment  of  debts,  and  the  standard  of  the  measure 
of  all  values ! 

Now  let  us  see  how  far  American  banks  resemble 
banks  of  discount;  or,  rather  to  what  extent  they 
yield  to  the  influence  of  the  salutary  powers  of  a  bank  of 
deposite  and  discount.  They  receive  deposites,  as  before 
explained.  They  discount  notes  and  acceptances.  But, 
instead  of  confining  their  discounts  to  actual  business  pa- 
per, having  but  short  periods  to  run,  they  discount  any 
paper  that  may  be  considered  safe,  for  the  accommodation 
of  those  who  wish  to  borrow  capital  as  well  as  money. 

The  banks  of  England,  (except  the  bank  of  England,) 
and  most  of  the  banking  establishments  in  the  large  cities 


54  buncombe's  free  banking. 

on  the  continent,  known  as  private  banking  houses,  are 
banks  of  discount ;  paying  their  discounts  in  money,  and 
confining  them  strictly  to  business  paper  :  while  American 
chartered  banks  discount  whatever  paper  is  offered  that  is 
well  secured,  and  pay  their  discounts  in  their  own  notes 
promising  to  pay  money  on  demand.  A  frequent  rule  of 
discrimination  (after  the  directors  and  stockholders  have  all 
been  accommodated,)  between  the  bills  offered  for  dis- 
count when  more  paper  is  offered  than  the  bank  is 
able  to  do,  is ;  firstly,  to  do  the  largest  bills,  where 
the  payment  is  to  be  made  in  some  eastern  city,  since  that 
affords  a  profit  on  the  bill  of  exchange,  drawn  by  the  bank 
for  the  re-payment  of  the  money,  of  five  times  the  amount 
of.  the  profit  on  its  loans  ;  and  then  to  proceed  to  select 
those  bills  that  afford  the  best  profit,  and  discount  to  the 
full  extent  of  their  means. 

As  European  banks  of  discount  only  lend  the  money 
furnished  by  the  proprietors  of  the  bank,  their  business  of 
banking  does  not  very  materially  expand  the  currency ;  as 
the  same  money  might  be  lent  by  the  proprietors  them- 
selves, without  the  intervention  of  the  bank :  although, 
where  money  is  deposited  on  demand,  and  the  deposits 
loaned  to  another  person,  two  men  have  the  credit  of  the 
same  sum  of  money,  and  the  currency  may  be  temporarily 
expanded  by  this  credit.  But  the  cupidity  of  chartered 
banking  companies  does  not  stop  here.  They  discount 
notes,  and  lend  money  upon  the  credit  of  their  specie  depos- 
ites ;  next  lend  the  deposites  as  part  of  their  own  capital, 
and  yet  allow  the  depositor  a  transfer  of  his  credit  on  the 
books  of  the  bank,  at  his  will  and  pleasure,  without  keep- 
ing on  hand  an  amount  of  specie  sufficient  to  meet  the  prob- 
able demands  by  the  return  of  their  own  notes  for  specie, 
before  the  bill??  receivable  held  by  them  fall  due. 


DUNCOMBE*S    FREE    BANKING.  55 

European  banks  of  discount  do  not  expand  the  paper 
currency  materially  above  a  purely  metalic  currency,  at 
their  pleasure,  or  to  the  extent  of  public  gullability. 

American  chartered  banks,  in  addition  to  their  powers  of 
banks  of  discount  and  'deposite,  are  also  banks  of  issue. 
They  lend  their  credit,  and  issue  their  own  bills  which  cir- 
culate as  money.  Thus  the  circulating  medium,  by  the  in- 
troduction into  it  of  paper  money  and  paper  credits,  create- 
able  at  the  pleasure  of  the  directors,  to  at  least  a  certain  ex- 
tent, in  addition  to  tho  coin  and  bank  deposites,  which  be- 
fore constituted  the  entire  currency  of  the  country,  now 
admits  of  fluctuations,  conti-actions  and  expansions,  un- 
known in  the  business  of  banks  of  deposite  and  discount 
unconnected  with  credit. 

As  will  hereafter  be  explained,  the  combining  the  opera- 
tions of  banks  of  issue  with  those  of  discount  and  deposite, 
has  confusedly  mixed  together  such  dissimilar  and  incon- 
gruous things,  that  it  has  mystified  the  subject  of  the  cur- 
rency, as  if  intentionally  to  confuse  and  mislead  the  public 
mind,  or  divert  it  from  the  investigation  of  its  elementary 
principles. 

The  author  has  attempted  to  direct  public  attention  to 
the  situation,  merits  and  importance  of  the  currency,  in  a 
political,  as  well  as  a  financial  point  of  view.  Years  of 
practical  experience,  and  a  minute  and  careful  observation  of 
the  operations  of  the  currency,  composed  of  state  charter- 
ed bank  paper,  its  commercial  inefficiency  as  a  circulating 
medium,  and  its  highly  exciting  political  influence,  have 
strongly  impressed  him  with  a  belief,  that  upon  the  reno- 
vation or  deterioration  of  the  currency,  depends  the 
growth  and  prosperity  of  republican  institutions  in  America, 
or  their  premature  decay  and  ultimate  destruction. 


56  duncombe's  free  bankinct. 

From  the  business  of  banks  of  discount  and  deposite,  it 
is  clear,  that,  since  they  lend  only  their  money,  their  profits 
consist  only  of  the  simple  interest  of  the  same.  Their 
loans  neither  inflate  the  currency  ;  nor  does  enormous  prof- 
its indicate  extortionate  charges  for  the  use  of  their  money, 
or  the  adoption  of  other  means  equally  injurious  to  the  per- 
manent prosperity  of  the  counti-y.  Every  abstraction  of 
money  from  an  individual,  or  from  the  public,  beyond  an 
equal  and  fair  remuneration  for  the  use  of  it,  savours  of  ex- 
tortion ;  for  money  can  never  be  worth  more  in  the  trade  of 
banking,  than  in  other  branches  of  business,  only  in  pro- 
portion to  capital  and  skill  required  and  risk  run,  unless 
some  means  be  resorted  to  not  justifiable  in  ordinary  busi- 
ness. 

The  profits  of  American  chartered  banks  is  chiefly  made 
upon  the  loans  of  their  credit.  The  sale  of  vi^hich,  in  the 
money  market,  has  been    authorized  by  legal  enactments. 

If  this  credit  banking  business  becomes  too  profitable, 
that  is,  pays  much  more  than  any  mercantile  or  other  busi- 
ness requiring  the  same  capital  and  skill,  and  liable  to  the 
same  risk,  it  proves  that  the  supply  is  not  equal  the  demand ; 
when  there  should,  and  consequently  there  does  spring 
into  existence,  other  institutions  to  meet  the  apparent  de- 
mand. Were  bank  paper  real  wealth  or  real  capital,  the 
cost  of  producing  which  bore  a  proportion  to  its  sale  price, 
the  value  would  be  reduced,  until  the  general  level  be- 
tween this  credit  jiaper  and  other  commodities  would  be 
established.  When  no  greater  profits  were  made  in  the 
manufacture  of  paper  money  than  in  the  manufacture  of 
other  commodities,  the  general  equilibrium  would  be  re- 
stored. This  may  be  illustrated  by  the  high  price  of  newly 
invented  improvements,  by  which  former  instruments,  im- 
plements  and   machinery  are    superceded.     The    public 


BtNCOMBE's   FREE   BANKING.  57 

Will  pay  for  the  improvement  a  higher  profit  on  its  pro- 
duction only  so  long  as  the  supply  shall  be  less  than  the 
demand.  Hence,  chartered  banks  in  America,  by  enjoy- 
ing a  monopoly  of  the  business  of  banking,  make  unjustly 
(though,  perhaps,  not  illegally,)  whatever  amount  of  profit 
they  divide  in  their  business  above  the  fair  remuneration 
for  the  capital  and  skill  and  risk  of  the  business,  as  com- 
pared with,  other  mercantile  operations. 

If  money  is  worth  more  than  the  legal  rate  of  interest, 
repeal  the  usury  laws,  and  bring  it  into  the  market  for  sale 
at  its  market  price,  like  other  commodities.  If  the  dangers 
of  loss  from  the  difficulty  of  collecting  debts,  and  the  in- 
efficiency of  the  laws,  be  greater  than  necessary,  pass  such 
bankrupt  laws  as  shall  summarily  collect  all  the  effects  of 
the  insolvent  debtor,  and  apportion  them  among  his  credit- 
ors equally,  according  to  the  amount  of  their  fair  and  equit- 
able claims,  and  release  the  debtor  from  further  liabilities, 
that  he  may  provide  for  his  own  subsistence. 


CHAPTER  III. 

THE    OBJECT    OF    THE    WORK. 

The  evils  of  the  present  currency  developed. — Some  able  financierfs  invited  to  irt* 
vestigate  the  currency. — Preserve  the  spirit  of  the  Declaration  of  Indepeu- 
dence — and  of  the  Constitution. — Render  the  currency  republican — uniformly 
current — perfectly  convertible — free  from  credit — free  from  politics — and  free 
from  private  interest. — Preserve  faith  with  creditors,  foreign  and  domestic. — 
Banks— Incorporations. — The  precious  metals  insufficient  for  the  currency. — 
Credit  rendered  expedient. — Incorporated  Bank  credit  anti-republican. — State 
debts — interest. — Ten  million  of  dollars.— Caution  necessary  in  reforming  the 
currency. — The  present  banking  system  radically  wrong. — Dependant  upon  pri- 
vate INTEREST,  and  composed  of  credit  paper. — The  currency  anti-republican. — 
Connected  with  politics. — The  four  pillars  of  government — Politics — Religion — 
Currency — and  Literature. — The  precious  metals  do  not  circulate  interchange- 
ably with  bank  paper. 

The  object  of  the  following  pages  is  to  show  the  evils  of 
the  present  circulating  medium  of  the  United  States,  and 
to  point  to  a  system  of  currency  that  would  be  less  objec- 


58  duncombe's  free  banking. 

tionable,  in  the  hope  that  some  able  financiers  may  turn 
their  attention  to  the  subject,  and  without  connecting  it  with 
the  party  feelings  of  the  day,  calmly  and  judiciously  per- 
fect a  currency  adapted  to  the  genius,  habits,  manners  and 
customs  of  the  people  of  these  United  States,  consistent 
with  the  fidelity  due  to  existing  contracts  at  home  and 
abroad,  and  an  honorable  protection  of  private  and  domes- 
tic, as  well  as  foreign  and  national  investments,  with  a  view 
of  producing  the  greatest  good  to  the  greatest  number — 
always  preserving  the  immutable  principles  contain- 
ed IN  THE  DeCLARITION  OF  INDEPENDENCE,  and  THE  PRE- 
SENT Constitution  of  the  United  States  inviolate. 

Let  the  people  of  this  Union  calmly  consider  in  what 
manner  the  currency  may  be  made  rej^uhlican  ;  rendered 
current  in  every  part  of  the  Union  ;  always  redeemable  in 
S2)ecie  at  sigJu  at  the  counter  wlie^'c  issued ;  be  'perfectly 
separated  from  credit,  from  2)oliticSj  and  from  'private  inter- 
est;  and  yet  be  adapted  to  the  genius  and  habits  of  the 
American  people,  and  the  preservation  of  good  faith  with 
existing  banking  institutions,  as  well  as  foreign  and  domes- 
tic creditors. 

The  genius  of  the  American  people,  as  well  as  the  state 
of  existing  contracts,  both  at  home  and  abroad,  all  demand 
a  larger  circulating  medium  than  the  present  disposition  of 
the  precious  metals  furnish.  Although  I  am  ready  to  ad-^ 
mit,  that,  if  no  chartered  bank  paper  circulated  as  money, 
and  if  we  were  free  from  debt  at  home  and  abroad,  it 
would  be  very  questionable  whether  a  paper  currency,  or 
any  other  credit  system,  could  be  judiciously  recommended 
to  republican  America  ;  but,  unfortunately,  this  is  not  the 
case.  We  are  in  debt,  both  at  home  and  abroad.  Credit 
pervades  every  department  of  business ;  and  bank  notes 
are  universally  received  as  money.     We  have  the  interest 


buncombe's  free  BANKING;  59 

of  a  foreign  debt  of  ten  million  of  dollars  and  upwards 
annually,  which  must  be  promptly  met  in  gold  and  silver, 
or  in  bills  of  exchange  or  other  remittances.  We  are, 
therefore,  compelled  to  take  things  as  we  find  them.  And, 
while  we  preserve  faith  with  the  public  and  private  credit- 
or, and  existing  monetary  institutions,  we  must  proceed 
with  great  caution,  if  we  would  attempt  to  remove  a  long 
established  custom  ;  especially  if  it  be  one  that  has  become 
assimilated  with  our  business  habits  and  transactions.  We 
should  look  with  great  caution,  and  even  suspicion,  upon 
every  new  system  of  currency  ;  and,  in  short,  nothing  but 
the  total  failure  of  all  the  former  plans  of  paper  money, 
would  justify  us  in  meddling  with  the  circulating  medium — 
which,  like  water,  will  find  its  level,  and  regulate  itself,  if 
left  free  and  unrestrained  by  legislative  enactments — but, 
when  exclusive  privileges  have  been  once  granted  to  indi- 
viduals, or  to  corporations,  they  should  be  cautiously  inter- 
fered with,  if  the  public  good  requires  that  they  should  be 
removed,  and  not  violently  thrown  down. 


CHAPTER  IV. 

ON  THE  VARIOUS  KINDS  OF  CURRENCY  IN  THE  UNITED  STATES. 

Specie — Convertible  paper — Inconvertible  paper — Incorporated  banks  dependant 
upon  politics — producing  political  excitement— endangering  the  republican  insti- 
tutions,— The  elementary  principles  of  all  governments. — The  farmer,  mechanic, 
and  laborer  choose  the  kind  of  currency  least  desirable  to  the  wealthy  merchant 
and  banker  — The  poor  equally  entitled  to  their  choice  of  the  kind  of  currency 
as  the  rich. — Specie  for  the  producer — paper  for  the  consumer. — Let  Congress 
organize  the  people  to  regulate  the  currency. — Suppose  $80,01)0,000  of  specie — 
Bank  upon  $40,000  000  to  produce  sufficient  currency — $20  smallest  denomina- 
tion of  bills. — Specie  $40,000,000  for  small  circulation — ^United  States  bank  issue 
bills  and  specie. — Local  banks  discount  bills  and  acceptances— give  security — 
sell  the  stock  to  any  purchaser  for  money — discount  only  business  paper — issue 
bills  upon  only  a  metalic  basis — to  be  current,  convertible,  plenty. 

The  slightest  examination  of  the  circulating  medium  of 
this   republic,  must  satisfy  every  disinterested  and  well 


60  buncombe's  free  banking. 

constituted  mind,  that  there  must  be  something  radically 
wrong  in  our  existing  system  of  banking  or  in  the  business 
of  our  bankers  and  brokers. 

Our  present  currency  consists  of  a  small  amount  of  spe- 
cie and  bullion,  a  larger  amount  of  specie-paying-paper, 
and  a  still  larger  amount  of  paper  not  redeemable  in  specie 
at  sight. 

The  paper  portion  of  our  currency  is  so  perfectly  depen- 
dant wpon  credit  J  and  so  intimately  connected  with  private 
interest^  as  to  be  continually  under  the  influence  of  the  one 
or  the  other  ;  leaving  thjB  currency  liable  to  those  danger- 
ous contractions  and  expansions  that  always  attend  a  credit 
currency  connected  with  private  interest :  while  the  de. 
pendence  of  incorporated  banks  upon  the  legislature  for 
extensions  of  their  charters,  or  for  increase  of  their  capi- 
tals, or  for  new  incorporations,  connects  the  currency  of  the 
country  with  its  politics  ;  producing  much  of  the  unneces- 
sary excitement  that  pervades  the  whole  community  at 
general  elections,  and  which,  at  some  future  period,  may 
endanger  the  very  existence  of  this  republic.  In  short, 
the  currency  of  these  United  States  is  anti-republican ; 
and  in  its  operations  hostile  to  democratic  institutions. 

Every  government  rests  upon  four  comer  pillars  :  their 
Politics — their  Religion — their  Finance — and  their  Litera- 
ture. And  as  these  are  well  or  ill  devised  and  conducted, 
so  are  the  people  contented,  prosperous  and  happy,  or 
otherwise. 

It  is  universally  admitted,  that  the  precious  metals  and 
promises  to  pay  on  paper,  cannot  circulate  at  the  same  time 
among  the  same  community;  the  precious  metals  being 
uniformly  preferred  by  mechanics,  laborers,  and  men  in 
small  business,  while  paper  money,  current  in  every  part 
of  the  Union,  redeemable  in  specie  at  the  will  of  the  hold- 


DUNCOMBE^S    FREE    BANKING,  61 

er  at  the  counter  where  it  was  issued,  is  generally  preferred 
by  commercial  men. 

To  meet  the  preceding  propositions  allow  me  to  submit 
the  following  outlines  of  a  plan  of  currency  : 

Let  congress  authorize  the  people  to  elect  competent 
financiers  from  every  state  in  the  Union,  to  meet  at  some 
convenient  place,  and  ascertain  the  amount  of  specie  in  the 
United  States,  and  the  amount  of  currency  that  is  requi- 
red for  the  business  of  the  country ;  and  to  bank  upon  so 
much  of  the  specie  as  would  be  sufficient  to  meet  the  de- 
mand for  a  circulathig  medium. 

Suppose,  for  instance,  that  we  have  in  the  United  States 
eighty  or  one  hundred  million  of  dollars  in  specie,  and 
that  we  require  one  hundred  and  fifty  millions  of  money  to 
form  a  currency  to  place  this  country  in  a  flourishing  con- 
dition, could  we  not  make  up  the  deficiency  by  banking 
upon  half  of  this  specie,  which  would  ^ive  the  whole 
amount  of  currency  required,  and  leave  the  other  half  for 
a  metalic  circulation  1 

The  issue  of  no  smaller  bills  than  circalate  in  England, 
or  at  the  least,  not  less  than  twenty  dollar  bills,  would 
bring  the  gold  and  silver  reserved  for  the  metalic  portion 
of  the  currency  into  common  circulation,  while  it  would 
not  in  the  least  interfere  with  existing  banking  institutions  ; 
as  their  small  bills  would  be  withdrawn  from  circulation, 
as  their  charters  expired  one  after  another,  and  their  place 
would  be  regularly  supplied  by  the  precious  metals. 

Let  the  United  States  directors  execute  the  bills  as  Uni- 
ted States  directors,  and  apportion  or  divide  the  amount 
among  the  several  states  according  to  the  demand,  and 
take  a  general  supervision  of  the  state  banks. 

Let  the  people  in  each  state  elect  state  directors  annual- 
ly, who  shall  execute  the  bills  as  state  directors  j  apportion 


€2  DUNCOMBE^S    FREE    BANKINCT. 

the  amount  set  apart  for  their  states  respectively,  between 
the  local  banks  or  hanks  of  discount  for  their  several  states, 
and  take  a  general  supervision  of  the  same. 

Let  the  electors  in  every  city,  town,  county  and  district, 
where  a  bank  of  discount  is  located,  elect  directors  of 
the  same,  in  the  manner  in  which  they  elect  the  most  nu- 
merous branches  of  their  legislatures  :  who,  before  entering 
upon  the  duties  of  their  offices,  shall  give  good  and  suffi- 
cient security  for  the  faithful  discharge  of  their  trusts,  and 
the  prompt  payment  over  to  their  successors  of  all  monies 
and  property  of  the  bank  in  their  possession  ;  execute  the 
bills  as  directors  of  the  bank  j  make  their  notes  payable  in 
specie  at  the  counters  where  they  are  issued,  at  sight ;  and 
do  all  the  ordinary  business  of  directors  of  a  bank  of  dis- 
count and  deposite  ;  but  at  no  time  to  circulate  more  paper 
than  three  times  the  amount  of  specie  actually  in  their 
vaults  at  tlie  time  of  the  discount,  nor  discount  paper  in 
Avhich  a  director  of  any  bank  has  any  direct  or  indirect  in- 
terest, or  on  which  a  director's  name  is  given  as  surety  for 
tlie  re-payment  of  the  money. 

Elect  the  directors  of  the  United  States  institution,  so 
that  only  one-sixth  part  of  them  shall  go  out  of  office 
annually. 

To  give  permanency  to  the  institution,  all  money  curren- 
cies should  be  as  uniform,  permanent  and  unchangeable 
as  the  precious  metals  themselves. 

To  obtain  the  necessary  funds  in  specie,  provide  that 
capitalists  may  take  stock  to  any  amount  of  specie  they 
will  pay ;  that  the  general  government  may  (if  congress 
think  proper,)  take  stock  to  the  amount  of  specie  they  may 
pay,  and  no  more  ;  and  that  the  state  governments  may 
take  stock  to  the  amount  of  specie  their  respective  legisla- 
tures  may  advise,  and  no  more ;  and  that  each  stockholder 


DUNCOMBE  S  FREE  BANKING.  b3 

shall  receive  their  regular  dividends  on  quarter  days,  but 
have  no  influence  or  control  in  the  aiFairs  of  the  bank  on 
account  of  their  being  stockholders. 

Thus  the  paper  portion  of  our  currency  would  be  issued 
upon  a  purely  metalic  basis.  No  government  debentures, 
post  notes,  foreign  or  domestic  exchanges,  United  States 
or  state  bonds,  or  other  public  or  jirivate  sureties,  would 
be  admitted  as  a  basis  for  the  issue  of  paper  to  circulate  as 
money. 

Such  an  institution  as  this  would  be  wholly  unconnected 
with  credit  and  private  interest,  and  free  from  the  ruinous 
contractions  and  expansions  of  the  currency  to  which  our 
credit  bank  paper  is  constantly  liable.  It  would  not  require 
the  intervention  of  the  legislature  to  renew  or  increase  its 
power,  and  therefore  would  be  unconnected  with  politics, 
and  not  liable  to  produce  the  political  excitement  which 
our  aristocratical  tnonetary  system  threatens.  It  would 
be  equally  current  throughout  the  Union — always  conver- 
tible into  specie  at  the  will  of  the  holder  at  the  counter 
where  it  was  issued,  and  consequently  a  purely  republican 
people's  money. 


64  buncombe's   PtlE£    BANKING, 

CHAPTER  V. 

ON   UNCURRENT   MONEY. 

Recapitulation  of  preceding  chapter. — ^Loss  to  the  puhlicby  uncurrent  money — un- 
certainty— inconvenience  in  travelling. — Brokers  rendered  necessary — Their  time 
should  be  better  employed  in  productive  industry. — Cincinnati  and  White  water 
Canal  Co. — Xotes'uncurrent. — Private  notes — Foreign  notes. — Exchange  ten  per 
cent,  for  the  use  of  paper  to  call  money — Otherwise  expensive. — Small  bills  in- 
crease panics — Panics  profitable  only  to  gambling  speculators.— The  fluctuations 
of  the  currency  a  loss  to  community. — Credit  often  useful. — On  a  new  farm  labor 
the  only  exchangeable  commodity. — Without  credit  life  maybe  wasted  in  indi- 
gence.— A  bad  state  of  the  currency  materially  conducive  to  misfortunes  and  pov- 
erty.— Ten  cents  a  day  for  a  family,  only  a  medium  tax  upon  uncurrent  money 
in  various  ways. — Small  bills  injurious  to  industry  and  economy. — Bank  paper  an 
incubus — a  night  mare — its  magic  wand — The  jugglery. — Tlie  history  of  credit 
paper  money,  one  of  dishonor,wa.ste,  ambition,  gambling  and  disappointment. — 
Rag  Barons  in  their  painted  Castles  tax  industry. — Change  the  scene — People 
elect  the  directors. — Productive  industry  the  only  true  source  of  wealth. — One 
man  with  $-500  judiciously  expended,  equal  to  two  men  without  funds  in  accumu- 
lating wealth,  in  the  new  countries  of  the  western  states. — Money  makers  indem- 
nify themselves — mystify  the  science— charge  for  their  services. 

In  a  previous  chapter,  I  have  stated  that  the  object  of 
this  work  is  to  direct  public  attention  to  the  subject  of  the 
circulating  medium ;  to  induce  a  spirit  of  enquiry  into  the 
causes  that  have  led  to  its  frequent  contractions  and  expan- 
sions, and  to  advise  some  constitutional  method  of  rendering 
the  currency  republican  like  the  other  elementary  prin- 
ciples of  our  government;  to  separate  it  from  credit,  and 
render  it  equally  current  in  every  part  of  the  United  States  ; 
always  redeemable  in  specie  at  the  counter  where  it  was 
issued;  also,  to  separate  it  from  politics. 

I  am  next  led  to  the  consideration  of  the  loss,  damage, 
discount,  inconvenience  and  uncertainty  attendant  upon  a 
currency,  that,  although  it  may  be  made  the  circulating  me- 
dium in  one  place,  cannot  be  made  to  circulate  freely  in 
other  parts  of  the  Union.  This  evil  is  loudly  complained 
of  in  the  present  currency,  composed  of  the  ordinary  bank 
notes  of  the  state  banks.  These  notes  may  circulate  free- 
ly in  their  respective  neighborhoods  ;  but  remove  tliem  into 
a  distant  market  or  state,  and  their  circulation  is  attended 
with  loss  and  inconvenience  to  the  holder.  And  this  uncer- 
tainty in  the  value  of  the  circulating  medium,  has  given 


duncombe's  free  banking.  65 

rise  to  the  great  number  of  brokers,  whose  time  and  labor 
might  otherwise  be  applied  to  some  useful  employment. 
But  the  inconvenience  of  this  limited  circulation  does  not 
end  in  occupyhig  (at  a  total  loss,)  the  time  of  a  large  num- 
ber of  persons  in  a  business  that  does  not  add  to  the  general 
stock  or  wealth  of  the  nation,  but  it  deprives  the  honest 
industry  of  the  laboring  man  of  his  just  reward.  Suppose 
he  labors  one  year  in  one  state,  and  receives  the  ordinary 
currency  of  the  place  in  payment  for  his  labor.  Say  his 
residence  is  at  Cincinnati :  he  receives  for  his  labor  paper 
purporting  to  be  money,  called  Cincimiati  and  Whitewater 
Canal  Co./- or  he  receives  as  paper  money,  a  certificate  of 
deposite  in  the  Mechanics  and  Traders^  Bank,  with  "  indi- 
vidual responsibility,"  to  be  paid  in  current  bank  notes ; 
or  he  has  received  his  wages  in  paper  called  Canal  Bank, 
but  which  is  only  a  deception,  proving  to  be  an  individ- 
ual promise  to  pay,  made  on  silk  paper,  ornamented  like 
bank  notes,  and  merely  stating  that  "  the  undersigned,  who 
has  an  office  c;;*  ^/^c  Canal  Bank"  &cc.\  or  he  receives  his 
pay  in  paper  of  other  state  banks,  long  after  the  notes  have 
ceased  tc  pass  current  in  their  own  neighborhoods.  And 
this  is  all  called  currency,  and  aids  the  idle  bankers  and 
brokers  in  living  sumptuously  upon  the  industry  of  other 
men,  without  putting  a  hand  to  the  wheel  themselves.  The 
laborer's  money  is  in  the  currency  of  the  place,  and  he  sup- 
poses he  has  received  the  value  of  his  labor,  but,  on  his 
journeying,  he  soon  finds  that  his  money  will  not  pass  cur- 
rent in  the  places  where  he  travels.  He  must  loose  per- 
cent.-age  after  per-cent.-age  upon  every  exchange  he 
makes,  until  his  expenses  are  nearly  doubled  by  the  de- 
mands for  discount  upon  his  paper  money,  at  the  various 
places  through  which  he  has  travelled.  Again,  the  mer- 
chant of  Cincinnati  must  pay  an  average  of  ten  per  cent,  to 


66  buncombe's  free  banking. 

make  this  paper  current  at  New  York ;  this  he  adds  to  his 
profit,  and  the  consumer  must  pay  for  all. 

Ten  percent,  is  a  handsome  profit  in  an  extensive  business ; 
and  this  the  whole  community  pay,  in  one  shape  or  another, 
to  incorporated  companies,  bankers  and  brokers,  for  the 
use  of  this  bad  currency. 

The  whole  people  have  equal  rights  to  any  seigniorage,  or 
other  profits  that  are  made  upon  coinage  by  the  government. 
But  in  these  United  States,  we  pay  annually  an  average  of 
from  ten  to  fifteen  per  cent,  to  private  incorporated  compa- 
nies— those  regulators  of  our  finance — for  mystifying  the  sub- 
ject of  currency,  and  furnishing  a  paper  money  that  is  plenty 
to-day  and  scarce  to-morrow  ;  scarcely  convertible  at  any 
time  but  seldom  'perfectly  convertible,  without  even  a 
look  or  act  from  the  banker  that  indicates  the  reluctance 
with  which  he  parts  with  his  specie ;  shewing,  that  even 
with  him,  his  own  promises  to  pay  are  considered  less  valu- 
able than  real  money  :  and,  therefore,  although  he  promis- 
es to  pay  on  demand,  he  prefers  that  the  demand  should 
never  be  made. 

Again,  the  loss  sustained  by  the  paper  money  holder,  is 
increased  by  the  great  uncertainty  of  the  continuance  of  its 
circulation,  or  the  stability  and  soundness  of  the  bank  ; 
and,  therefore,  goods  are  purchased  that  are  not  M^anted, 
and  expenses  increased  unnecessarily,  because  the  holder 
of  the  money  thinks,  perhaps,  it  may  not  be  good  long, 
and  that  he  may  as  well  spend  it  as  lay  it  by  him.  Thus 
few  men  have  large  or  even  small  sums  of  money  lying  by 
them  for  any  length  of  time.  And  this  is  another  cause  of 
the  severity  of  the  money  panics,  or  money  shocks,  and 
contractions  :  there  are  but  small  sums  of  money  to  be  found 
among  the  people  that  can  be  used  by  the  people,  when 
the  banks  suspend,  refuse  to   discount,  or  make   extraordi- 


buncombe's  free  bvanking.  (J7 

nary  demands  upon  their  debtors  for  immediate  payments  of 
their  long  credits. 

If  there  were  no  small  bills  in  circulation,  there  would 
always  be  some  money  among  the  people ;  which,  when 
the  value  of  specie  becomes  very  much  increased  above 
the  ordinary  rate,  would  be  unlocked  and  brought  out  in 
the  shape  of  loans  or  purchases  at  sales  at  auction,  or  some 
other  way,  and  pressures  would  not  extend  through  every 
ramification  of  business  and  of  society,  as  it  uniformly  has 
done  under  a  paper  credit  system  for  years  past — afflicting 
and  ruining  thousands  who  had  no  influence  in  creating  the 
panic,  or  profit  in  the  excessive  expansions  and  extrava- 
gance that  preceded  it.  In  short,  panics  are  profitable  only 
to  gambling  speculators.  A  few  of  whom  make  fortunes 
upon  the  gullibility  of  the  producers  ;  while  thousands 
of  honest,  industrious  men  are  ruined,  that  a  few  idle  bro- 
kers, bankers,  and  gambling  speculators,  may  command 
fortunes,  often  to  be  squandered  as  thoughtlessly  as  it  has 
been  accumulated  easily  ;  with  them  the  maxim  of  "  light 
come,  light  go,"  is  generally  correct. 

At  the  first  glance,  one  would  be  led  to  think  that  this 
money,  or  property,  only  changes  hands  ;  and  that  the  com- 
munity are  none  the  worse  for  the  change,  and  that  there  is 
just  as  much  capital  afloat,  and  among  the  people,  as  there 
would  have  been  had  it  not  changed  hands,  and  these  great 
sacrifices  been  made  by  the  pressure  of  the  times ;  and 
that  individuals  only  suffer  who  are  direct  loosers.  But 
look  again,  and  you  will  at  once  see  a  very  wide  differ- 
ence between  this  statement  and  the  facts  of  the  case. 
Productive  industry  is  the  only  true  source  and  fountian  of 
wealth  in  any  and  every  country. 

Industry  cannot  always  be  productive  without  some 
capital ;  and  here  sound  credit  may  sometimes  be  useful. 


68  duncombe's  free  banking. 

A.  purchases  a  small  lot  of  land.  This  exhausts  his  funds  ; 
and  he  has  only  his  axe  to  aid  him  in  his  exertions  to  make 
a  living  for  himself,  and  suj^port  a  small  family  on  his  new- 
farm,  Three  days  in  the  week  he  labors  for  a  neighbor  to 
purchase  provisions  for  himself  and  family ;  two  days 
are  spent  in  making  little  repairs  about  his  place — building 
with  his  own  hands- — changing  work  with  his  neighbors — 
first  to  hire  a  team  to  draw  logs  for  his  house,  then  for  a 
horse  to  go  to  the  mill,  then  for  their  help  to  do  such  jobs 
on  his  place  as  one  man  cannot  accomplish  alone — he  then 
has  but  one  day  left  for  chopping,  clearing  and  sowing  his 
farm.  Thus  the  best  of  his  life  is  w^asted  in  struggling 
single  handed  w^ith  trees,  bad  roads,  deep  snows,  accidents, 
sickness,  and  unavoidable  misfortunes.  And  all  this  is  ow- 
ing to  a  bad  currency.  For  had  he  had  good  money,  he 
would  have  saved  a  shilling  or  ten  cents  more  a  day  in  real 
money.  Ten  cents  a  day  is  not  above  the  daily  tax  or  dis- 
count on  uncurrent  paper-credit  money,  paid  by  every  man 
of  a  family  in  the  purchase  of  his  family  necessaries.  He 
cannot  get  a  bill  changed  for  any  thing  he  wants  to  pur- 
chase in  small  quantities  ;  consequently,  he  must  buy  what 
he  does  not  w^ant,  or  a  greater  quantity  of  what  he  does 
want,  to  get  his  bill  in  part  only  into  small  change. 

What  a  charm,  or  spell,  is  thrown  over  the  commercial 
world ;  that  while  all  complain  of  the  depreciation  and  in- 
convenience of  state  chartered  bank  paper,  they  tamely  sub- 
mit to  the  imposition,  and  '*  spell-bound,"  implicitly  obey  its 
"  magic  wand,"  which,  while  it  appears  to  charm  paper 
into  gold,  it  actually  converts  gold,  labor  and  the  wages  of 
honest  industry,  into  charmed  paper  money,  which  disap- 
pear  the  moment  you  attempt  to  grasp  it. 

Now  let  us  see  how  much  he  paid  for  the  privilege  of 
using  paper  money,  to    those  from  whom   he  bought  his 


buncombe's  free  banking.  60 

provisions  and  family  necessaries  ;  for  he  did  not  go  direct- 
ly to  the  broker  and  give  him  ten  cents  on  a  dollar  for  spe- 
cie— (v^hich  would,  after  all,  probably  been  cheaper  for 
him  to  have  done  in  the  end  to  have  converted  his  paper 
money  into  change) — but  he  managed  (as  he  termed  ij,)  to 
get  change,  sometimes  by  treating  a  friend  or  two  who  did 
not  need  it,  sometimes  by  buying  what  he  did  not  want, 
or  more  than  he  otherwise  w^ould  have  done  of  the  real  ne- 
cessaries for  his  family,  which  were  often  in  part  wasted  ; 
to  say  nothing  of  his  getting  now  and  then  a  bad  bill  in 
exchange,  by  which  he  looses  a  dollar  or  more  at  once — of 
which,  however,  he  complains  bitterly.  Well,  as  I  said 
before,  his  average  daily  expenses,  occasioned  by  bad 
money,  that  is,  money  that  is  not  good — paper  money  of 
every  description — is  ten  cents  a  day.  This  sum,  for  four 
years,  the  time  spent  in  his  father's  neighborhood,  before 
going  into  the  forest  to  commence  business  for  himself, 
amounts  to  $146 — his  bankers  and  broker's  bill !  this,  too, 
is  supposing  he  has  kept  clear  of  banks,  and  never  borrow- 
ed a  cent  himself,  or  endorsed  for  any  one  else ;  by  which 
he  might  have  lost  the  whole  amount  at  "  one  fell  swoop  ;" 
while,  with  a  sound  currency,  and  money  as  plenty  as  any 
other  commodity,  he  would  have  saved  ten  cents  a  day, 
which  would  leave  him,  after  paying  for  his  farm,  #146  for 
improvements  and  comforts. 

How  different,  then,  is  the  situation  of  the  man  of  sound 
currency  and  the  man  of  paper  money.  The  one  com- 
mences in  the  wilderness  without  one  shilling,  and  contin- 
ues poor  through  life,  while  the  other  commences  wdth  the 
necessary  materials  for  beginning  in  the  woods ;  and  al- 
though their  labors  and  hardships  are  very  great,  yet  the 
paper-money  man  has  a  life  of  wretchedness,  poverty  and 
ignorance  before  him,  while  the  sound-currency  man  has  a 


70  buncombe's  free  banking. 

hope,  and  even  a  reasonable  prospect  of  competence  and 
comfort,  if  not  of  wealth.  And  all  from  this  slight  differ- 
ence in  their  first  beginnings. 

And  if  this  is  a  true  picture  of  the  baneful  effects  of 
inconvertible  paper  money  in  one  instance,  show  me 
where  the  effect  upon  the  consumer  is  not  the  same  through- 
out society.  I  have  watched  paper  money,  and  1  believe 
its  history  is  one  of  dishonor,  discredit,  waste,  extravagance, 
pride,  vanity,  ambition  and  disappointment ;  and,  in  short, 
that  if  "  the  love  of  money  is  the  root  of  all  evil,"  the  love 
of  paper  money  is  the  evil  itself,  for  it  contains  all  the 
temptations  to  vice  and  immorality  chargeable  upon  money, 
while  it  is  only  its  shadow  and  not  its  substance  ;  and  it  is 
none  the  less  emblematical  of  the  fountain  of  vice  for  its  be- 
ing but  a  semblance  of  what  it  professes  to  be. 

How  long  will  men,  who  claim  to  themselves  the  exclu- 
sive privileges  of  independence,  and  the  boasted  glory  of 
equality,  Vjow  their  necks  to  the  paper  money  lender,  and 
become  tax-payers  to  Rag  Barons,  in  their  painted  paper 
castles  ]  All  that  is  necessary  is  to  let  common  sense 
govern,  and  not  allow  interested  bank-men  to  control  the 
circulating  medium  at  their  pleasure,  and  to  suit  their  pri- 
vate interests.  But  make  currency  republican  ;  allow  the 
people  to  elect  the  directors  of  all  the  financial  instituitons 
of  the  country,  and  let  the  demand  regulate  the  supply ; 
remove  i)rivaie  interest  from  the  regulation  of  currency ; 
make  the  circulating  medium  equally  currrent  in  every  part 
of  the  Union,  and  you  save  for  the  industrious  laborer  a 
competence — for  the  man  of  extensive  business,  a  certain 
independence — and  for  all,  peace,  prosperity  and  plenty. 

Here  then  we  may  again  show,  that  productive  indus- 
try, being  the  only  true  source  of  wealth  to  individuals,  is 
so  to  a  community.     And  where  hundreds,  nay,  thousands, 


DUNCOMBE*S  FREE  BANKING.  71 

are  compelled  to  labor  for  a  bare  subsistence  above  the  tax 
they  pay  to  paper  money,  the  public  looses  the  difference 
in  their  product,  between  what  they  now  produce  and  what 
they  would  be  able  to  produce  with  the  saving  of  the  an- 
nual paper  money  tax,  or  broker's  tax.  For  if  two  men, 
without  means,  in  a  new  country,  cannot  produce  more 
profit  in  clearing  and  farming  new  land,  than  one  man  can 
with  five  hundred  dollars,  over  and  above  the  simple  inter- 
est on  the  $500,  then  it  follows,  that  every  $500  collected 
by  brokers  from  honest  industry,  to  be  spent  in  idleness,  is 
a  loss  of  one  man  to  community,  and  of  course  a  drain  to 
that  amount  upon  the  labor  of  the  industrious  ;  besides  the 
loss  of  his  own  time,  which  might  be  employed  in  some 
productive  enterprise  or  business. 

The  currency  of  the  country,  being  left  in  the  hands  of 
interested  individuals,  is  it  at  all  surprising  that  those  indi-. 
viduals  should  compensate  themselves  for  its  management  ^ 
And  where  it  is  left  wholl}^  to  themselves  to  say  to  what 
amount  they  are  to  be  compensated,  is  it  at  all  surprising 
that  they  should  arrange  their  plans  so  as  to  receive  a  regu- 
lar income  from  the  labor  of  the  community,  for  their  supe- 
rior skill  and  financial  powers  of  mystifying  the  science  of 
finandt,  and  managing  said  currency,  so  that  their  abilities 
may  be  in  constant  requisition,  and  they  rendered  inde-- 
pendent  by  the  gullibility  of  the  producers  ? 


UIXZ 


72  DUIN COMBE'S  FREE  BANKING. 

CHAPTER  VI. 

ON  THE  INFLUENCE  OF  BANKS  UPON  THEIR  NEIGHBORHOODS, 

The  common  opinion  that  banks  cniich  a  place  erroneous. — Flush  of  money — 
lessened  productions — lessened  wealth. — Foreign  goods — fancy  merchandize — 
high  prices — increased  expenses — money  paid  for  every  commodity — Expense 
of  living— houses,  carriages  and  horses  must  be  fashionable,  and  the  bank  receives 
the  credit. — The  place  prospers  until  payday  comes. — The  scene  changes. — 'Jhe 
bankers  have  become  rich— the  producers  grow  poor. — The  bank  is  to  be  paid — 
the  merchant  is  to  be  paid — the  meclianic  is  to  be  paid — .Tlicy  all  owe  the  bank, 
and  where  is  the  money  to  pay  with  ? — The  evenings  of  years  of  hard  industry 
can  only  satisfy  for  bank  credits  and  their  consequences. — Occasionally  a  coun- 
terfeit note,  or  note  of  broken  banks,  is  left  with  the  laborer. — When  the  price  of 
monf^y  is  high  the  brokers  only  have  it  for  sale — new  securities  must  be  given — 
mortgages — ^judgement  bonds. — 'J'he  great  credit  farce  is  up. — Ask  the  inhabit- 
ants of  the  place  whether  the  bank  benefitted  or  injured  its  permanent  prosperi- 
ty.— Endorsers  made  liable — pledged  securities  forfe'ted. — The  sheriff  closes  the 
drama  by  the  unwelcome  sound  of  his  hammer. — Bank  credit  and  bank  paper, 
shadow!^,  varying  as  the  moon. —  The  bewitching  vice  of  gambhng  thus  induced. — 
Credit  has  done  much  towards  rapidly  advancing  the  prosperity  of  the  Union — 
when  properly  applied  and  duly  limited,  of  infinite  value — its  abuse  fatal. — 
The  Iionest  and  industrious  support  the  vicious  and  idle. 

The  first  effect  of  establishing  a  bank  in  the  neighbor- 
hood is,  that  those  who  had  no  money  before,  soon  find 
they  have  new  bank  bills  passing  through  their  fingers 
daily  ;  and  they  really  believe  tlie  place  is  very  ranch  bene- 
fitted by  having  a  bank  established  in  it.^  This  opinion  so 
genei'ally  prevails  throughout  the  United  States,  that  I  have 
no  expectation  of  being  believed,  should  I  tell  them  that 
this  is  a  fallacy — a  mistake — an  error  ;  and  at  the  very  mo- 
ment a  bank  goes  into  operation  in  a  place,  its  real  w^ealth 
begins  to  diminish,  instead  of  being  increased,  ^ut,  I 
should  not  be  at  all  surprised  if  my  gentle  reader  should 
be  a  little  curious  to  know  how  this  bank  jugglery  is  con- 
ducted, since  the  transactions  are  made  before  his  eyes  so 
perfectly,  that  he  believes  it  to  be  real  wealth  that  is  ac- 
cumulating around  him.  He  sees  that  the  village  stores 
are  better  supplied  with  foreign  goods  and  fancy  articles 
than  they  had  been  before  the  opening  of  the  new  bank  ; 
that  many  of  the  inhabitants  who  lived  cheaply,  plainly 
and  even  homely,  now  dress  better — have  their  houses 
furnished  and  feed  better  than  formerly  ;  and  that  even  the 


duncombe's  free  banking.  K^ 

boys,  who  were  only  employed  in  hard  labor,  are  now  em- 
ployed by  the  merchants  and  tavern  keepers,  and  receive 
their  pay  in  money,  instead  of  being  required  to  take  home 
grain  or  meat,  or  clothing,  for  their  parents  and  family. 
Now,  says  the  sophistical  reasoner,  how  is  it,  that  since  the 
location  of  a  bank  in  this  place,  new  houses  have  been 
built,  and  old  ones  newly  painted,  and  carriages  have 
been  bought  by  those  who  walked,  or  rode  in  plain  waggons 
before — every  body  has  money  now,  while  nobody  had 
money  before.  This,  say  they,  is  proof  positive  of  the 
beneficial  effects  of  a  bank  in  the  place  ;  besides  this  there 
is  an  advance  in  the  price  of  all  the  real  estate  in  the  place  ; 
every  thing  flourishes  and  looks  respectful  and  business 
like.  But,  when  pay  day  comes,  public  indignation  will  be. 
kindled  against  the  bank.  The  whole  village  inhabitants 
may  exclaim,  "  woe  unto  ye,  scribes  and  pharisees,  hypo- 
crites !  for  ye  are  as  graves,  which  appear  not ;  and  the  men 
that  walk  over  them,  are  not  aware  of  them." 

Walk  with  me  behind  the  curtain,  and  see  how  this  won- 
derful secret  bank  money-making  is  conducted,  and  witness, 
in  detail,  the  facts  at  which  I  have  hinted.  Here  all  is 
elegant — all  is  grand — all  is  rich  ! 

Now  let  us  look  at  the  accounts,  and  you  will  see  that 
Mr.  A.  the  merchant,  borrowed  money  from  the  bank  to 
replenish  his  store  of  goods,  and  two  of  his  neighbors,  who 
have  money  plenty,  and  are  purchasing  horses  and  car- 
riages and  building  fine  houses,  are  his  endorsers — they, 
too,  have  opened  an  account  at  the  bank,  and  by  endorsing 
for  each  other,  find  no  difficulty  in  getting  what  money 
they  want.  And  the  increase  of  business,  has  justified  the 
merchants  and  tavern-keepers  to  advance  in  their  style  of 
living ;  and  to  keep  pace  with  them,  the  mechanics  and 
laborers  have  added  a  slight  expense    to  their  mode  of 


74  buncombe's  free  banking, 

living.  And  all  this  show  of  wealth  is,  in  fact,  an  increas- 
ed expense  without  a  corresponding  increase  of  income. 
Time  glides  smoothly  on,  until  the  bank  notes  have  to  be 
renewed,  as  they  cannot  then  be  paid,  because  the  makers 
have  not  realized  all  their  visionary  hopes  of  wealth  from 
credit.  Bank  paper,  and  its  concomitant  extravagance, 
has  left  but  little  behind.  Other  neighbors  are  drawn  in  as 
endorsers  and  borrowers,  until  the  whole  neighborhood 
have  been  borrowers  of  credit  and  bank  paper.  They 
now  find,  that  to  satisfy  the  demands  of  the  bank,  they 
must  have  recourse  to  some  stratagem  to  obtain  a  longer 
credit.  They  have  become  defaulters  at  the  bank,  and 
therefore  the  bank  cannot,  according  to  its  rules,  discount 
paper  on  which  their  names  are,  either  as  endorsers  or  ma- 
kers. Now  steps  in  the  convenient  broker.  He  will  lend 
them  money  at  ten  per  cent,  for  ninety  days,  for  two  or  three 
per  cent,  a  month  ;  and  mortgages,  or  other  security,  are 
made  to  him  for  a  sum  that  meets  the  first  pressing  demand 
of  the  bank.  Or,  he  procures  for  them  money  from  some 
other  state  or  monied  institution,  that  is  glad  to  lend  its  un- 
current  money  on  good  security,  at  par.  The  bank  will 
not  take  this  money,  but  the  partner,  sub  rosa,  the  broker, 
will  give  them  bankable  money  for  it,  at  ten  per  cent,  dis- 
count. Now  the  great  credit  farce  is  completely  in  opera- 
tion !  The  village,  with  all  its  domestic  habits,  virtues,  in- 
dustry, prudence  and  economy,  has  become  like  a  painted 
castle.  Itmay  dazzle  mens  eye's  ;  but  it  is  fall  of  wretch- 
edness and  woe.  Business  is  almost  at  a  stand.  The 
merchant  fails  to  meet  his  foreign  engagements ;  and  the 
bank,  finding  that  no  more  can  be  made  out  of  these  inhabit- 
ants, under  real  or  pretended  pressure,  sues  and  sells  out 
the  effects  of  the  old  inhabitants,  who,  one  after  another, 
leave  for  the  west,  with  the  small  remains  of  a  once  respecta- 


buncombe's  free  banking.  75 

ble  property  and  competence,  to  tell  their  new  neighbors  of 
the  damag  ?s  they  have  sustained  by  endorsing  and  being 
security  for  others.  But,  trace  all  this  misery  to  its  proper 
foundation,  and  it  will  be  found  in  bank  credit. 

You  will  read  more  of  the  true  causes  of  misfortune — 
(another  word  for  extravagance) — in  money  matters,  in 
the  history  of  paper  money,  than  can  be  found  in  all  the 
other  enterprises  ever  undertaken  by  man. 

Bank  credit,  and  paper  money,  are  but  shadows  of  real 
wealth  ;  and  those  who  enjoy  the  one,  seldom  ever  know 
the  value  of  the  other. 

Gambling  is  a  bewitching  vice  ;  it  is  ruinous  to  both 
mind  and  body.  And  any  extension  of  bank  credit  beyond 
its  legitimate  bounds,  is  only  another  name  for  a  species  of 
legalized  gambling ;  and  the  charms  it  first  possesses  in 
the  food  it  furnislies  for  our  vanity  and  ambition,  soon  give 
place  to  the  necessity  of  continuing  it,  to  save  what  little 
effects  may  still  remain. 

Those  who  live  beyond  their  incomes,  and  spend  mo- 
ney borrowed  upon  interest,  may  rely  upon  it,  that  they 
never  will  live  upon  the  interest  of  their  own  money. 
They  have  mortgaged  the  principal  for  the  use  of  the  inter- 
est ;  and  rest  assured,  that  that  mortgage  never  will  be  re- 
deemed— that  is  impossible ;  for  borrowing  one  sum  to 
pay  another,  and  reserving  interest  out  of  the  sum  borrow- 
ed to  pay  the  interest  on  the  last  loan,  to  preserve  credit, 
does  not  make  productive  capital.  To  borrow  a  new  sum 
to  make  the  interest  on  both  sums,  must  produce  ruin 
eventually. 

All  who  have  witnessed  the  rapid  growth  and  prosperity 
of  the  United  States,  must  admit  that  credit  has  done  much 
in  accomplishing  that  object,  by  allowing  the  industrious 
and  enterprising  to  anticipate  their  own  resources.     Cred- 


?6 

it  has  done  wonders  in  producing  tlie  rapid  advancement? 
bf  this  country,  when  compared  with  those  countries  where 
credit  and  enterprise  have  been  less  conspicuous.  Credit, 
when  confined  within  proper  limits,  is  one  of  the  most  pow- 
erful stimulants  to  the  production  of  national  wealth,  as  is 
witnessed  and  felt  by  every  man  who  settles^  in  a  new  coun- 
try where  capital  is  scarce  and  hard  to  be  obtained.  Yet 
the  abuse  of  credit,  is  as  certainly  ultimately  fatal  to  the 
prosperity  of  communities,  as  it  is  of  individuals. 

While  speaking  of  credit,  allow  me  once  for  all  to  re- 
mark, that  sound,  rational,  consistent  credit,  may  be  and  is 
every  day  rendered  useful  to  men  in  business ;  but  that 
wild  speculations  Ufon  credit,  by  which  men  spend  more 
than  they  earn,  is  the  kind  of  which  I  complain  ;  and  that 
while  speaking  of  the  damages  of  bank  credit,  I  would  be 
understood  to  mean  that  by  which  men  of  straw  live  by  their 
impositions  upon  the  industry  of  others,  buying  what  they 
are  unable  to  pay  for,  and  involving  their  friends  to  an 
amount  equal,  if  not  greater,  than  that  of  their  actual  wants, 
to  indulge  in  extravagance  and  unnecessary  expenses. 


duncombe's  eree  bankino.  77 


CHAPTER  VII. 

ON    REPUBLICAN    CURRENCY. 

The  advantages  of  a  republican  currency  over  the  pr€scnt  anti-republican  cur- 
rency of  incorporated  bank  paper. — The  benefits  of  a  sound  credit  system  uui- 
formly  admitted — Punctuality  in  payment  important — The  exclusive  privi- 
leges of  incorporated  banking  companies — Kxpected  to  make  every  body 
rich — master  of  every  man's  secret  business — and  establishes  or  ruin  their 
credit. — Directors  of  banks  make  as  much  money  out  of  the  people  as  they  can. 
Bank  honor  lends  money  freely,  while  it  promotes  their  own  interest,  and  sues, 
without  remorse,  while  money  can  be  made  by  coutractious  of  the  bank's  issue*. 
Brokers  profit— or  the  banker  only  discounts  notes  due  in  N.York  or  some  eastern 
market,  worth  5  or  10  per  cent,  above  their  value  atthebank— Or  only  a  small 
part  of  the  money  may  be  drawn  out  of  the  bank.— The  usury  laws  enliance  the 
rate  of  interest— Money-currency — Commodity-currency — Specie  not  exported 
when  bills  of  exchange  are  dearer  than  specie. — The  business  of  banking  is  lend- 
ing money,  not  becoming  brokers. — Speculations  prevent  ordinary  banking  busi- 
ness— They  monopolize  the  currency — then  monopolize  the  trade — then  regulate 
the  prices  of  commodities.— Private  interest  injurious  to  currency  as  a  commer- 
cial commodity.— Banks  lend  their  credit  to  the  highest  bidder.— Monopoly  in 
flour,  lumber,  salt,  or  other  commodities,  like  a  monopoly  in  currency,  injurious. — 
The  temptation  of  limited  liability  to  fraud,  in  banking  as  in  any  other  business.— 
Paper  money  practically  made  a  legal  tender  in  the  payment  of  debts.— Incor- 
porated banking  companies  have  small  inducements  to  prefer  the  publiic  good  to 
the  interest  of  the  compan3% — Chartered  companies  for  all  purposes  anticipate 
the  public  good. — Rail  roads,  canals — advance  prices — circulate  money. — Public 
works  unprofitable,  unless  they  pay  in  tolls — immenso  power  of  internal  im- 
provement companies. 

As  the  advantages  of  a  limited  credit  have  been  uniform- 
ly admitted  throughout  the  Union  from  the  time  of  the  Dec- 
laration of  Independence  to  the  present  day,  nothing  need 
be  said  in  favor  of  a  reasonable  credit,  but  to  have  it  con- 
fined within  legitimate  limits,  and  prevent  that  laxity  of 
payments  that  so  often  accompanies  an  over-strained  cred- 
it. To  continue  credit  sound  andpaymoiits  punctual,  is 
the  great  desideratum  of  the  credit  system.  The  old  max- 
im, that  "  punctualit;y  is  the  life  of  business,"  has  been  ne- 
cessarily often  repeated  to  American  debtors,  and  must  be 
again  and  again,  if  it  is  intended  that  credit  shall  be  profit- 
able alike  to  the  lender  and  the  borrower,  and  neither  suf- 
fer loss  from  the  forgetfulness  of  the  one  or  the  impatience 
of  the  other. 

Incorporated  companies,  being  invested  with  certain  ex- 
clusives  priviliges,  and,  consequently,  having  distinct  and 
separate  interests  from  the  community  at  large,  are  looked 


t8  duncombe's  free  banking. 

upon  as  a  distinct  order  in  society  ;  and,  by  some,  as  pos- 
sessing the  power  to  make  every  body  rich  about  them. 
The  directors,  being  chosen  from  among  the  wealthiest  of 
the  stockholders,  acquire  great  consequence  in  society, 
from  their  having  the  jDower  of  giving  to  those  whom  they 
choose  the  appearance  of  wealth ;  allowing  them  such  ex- 
tended bank  credit,  and  such  other  bank  facilities  as  they 
may  require  ;  as  well  as  being  the  repository,  to  a  certain 
extent,  of  the  secrets  of  every  man's  finances.  One  word 
from  a  director  of  the  only  bank  in  the  place  is  sufficient  to 
gi^ve  a  man  credit,  or  ruin  his  prospects.  Yet,  how  few, 
who  vote  for  the  election  of  a  representative  to  a  legislative 
body,  in  the  expectation  that  *'  he  will  get  us  a  bank,"  think 
he  will  place  a  censor  upon  their  credit  and  business,  who, 
unless  they  patronize  his  institution  and  pay  up  punctually 
too,  for  all  the  accommodations  they  enjoy,  will  be  declar- 
ed by  him  delinquents,  and  have  their  credit  injured,  not 
only  in  that  institution,  but  in  such  others  near  them  as  their 
necessities  or  interests  may  induce  them  to  patronize. 

The  bank  directors  of  incorporated  institutions,  are  cho- 
sen by  stockholders,  who  vest  their  money  or  capital,  in  the . 
traffic  called  banking,  with  the  view  of  making  as  much 
profit  as  they  lawfully  can;  under  a  belief  that  if  they  can 
keep  their  money  and  bank  upon  their  credit,  keep  other 
people's  money  in  deposite  and  bank  upon  that,  they  may 
make  an  increased  profit  on  both  of  these  transactions. 
That  this  is  the  best  investment  that  they  can  make  of  their 
money,  there  is  no  doubt,  especially  if  they  can  discount 
largely  for  each  other,  and  use  in  other  business  as  brokers 
or  merchants,  a  large  share  of  the  same  capital  that  is  pro- 
fessedly employed  in  the  banking  business.  Directors  thus 
chosen,  are  bound  to  use  the  best  of  their  ability  to  promote 
the  interest  of  the    company.     They  have  nothing  to  do 


BUNCOMBE  S  FREE  BANKING.  70 

wilh  the  interest  of  the  community  at  large  any  further  than 
their  interests  with  that  community  are  identified.  Hence, 
the  very  common  error  entertained  among  men,  are  fie- 
quently  expressed,  that  the  directors  have  done  very  wrong 
in  not  discounting  the  note  of  A.  when  they  immediately 
after  discounted  a  note  for  B.  with  no  better  names  on  it 
than  were  on  the  note  of  A.  But  before  censuring  a  bank 
director  for  mal-practices  in  his  office,  they  should  reflect, 
that  the  laws  of  their  organization  bind  the-m  to  make  as 
much  money  as  they  legally  can,  how  little  you  can  do  to 
him  if  you  are  not  a  stockholder,  that  can  effect  him,  provi- 
ded the  stockholders  are  satisfied  with  his  conduct.  They 
elect  him — they  pay  him — they,  in  short,  give  him  his  con- 
sequence in  society  ;  and  he,  in  turn,  makes  as  much  money 
for  the  association  as  he  can  under  their  charter. 

Bank  honor  means,  or  consists  in,  giving  their  notes  with 
only  limited  responsibiUty  without  interest,  for  the  borrow- 
er's note  and  interest,  with  unlimited  responsibility  of  him- 
self to  the  whole  amount  of  his  estate,  in  addition  to  two 
good  endorsers,  equally  responsible,  to  the  amount  of  the 
exchanged  note  or  notes.  Yet,  when  times  are  hard  and 
money  scarce,  and  worth  more  than  six  per  cent.,  the  bor- 
rower must  flatter  the  bank  directors,  and  contrive  some 
means  of  evading  the  clauses  of  their  charter,  that  renders 
it  penal  for  them  to  charge  a  higher  rate  of  interest  than  the 
law  allows,  as  they  will  not  lend  their  paper  below  the 
highest  price  it  will  bring.  Among  the  most  feasible  and 
consistent  operations  for  obtaining  a  high  rate  of  interest 
lawfully,  is  that  of  making  the  note  payable  in  some  distant 
market,  where  the  money  will  be  worth  more  to  the  banker 
than  it  would  be  in  his  own  vaults,  by  allowing  him  to 
charge  a  handsome  premium  on  the  sale  of  the  draft  for 
the  money. 


80  DUNCOMBE  S  FREE  BANKING. 

The  directors  may  discount  a  note  for  twice  or  three 
times  the  amount  of  money  to  be  drawn  out  of  the  bank, 
there  being  an  understanding  between  them  and  the  draw- 
er of  the  note,  that  part  of  the  mone}^  o^V  will  be  drawn — 
the  remainder  being  left  in  deposite  until  the  note  becomes 
due ;  so  that,  while  the  bank  receives  double  or  treble  in- 
terest for  the  money  actually  paid  to  the  drawer,  the  sure- 
ties are  held  for  two  or  three  times  the  amount  lent  upon 
the  note  they  endorsed.  Thus  private  interest  regulates 
the  whole  transaction.  When  times  are  easy,  and  money 
is  flush  in  the  market,  it  may  be  loaned  again,  as  at  first, 
upon  simple  interest.  But,  unfortunately  for  those  who 
have  had  their  notes  extensively  "shaved"  by  brokers 
or  bankers,  they  are  seldom  ever  afterwards  in  such  cred- 
it as  to  borrow  money  for  any  length  of  time  at  simple 
interest. 

Here  again  we  see  the  influence  of  the  ill-advised  and 
unfortunately  continued  usury  laws,  which  drive  the  con- 
scientious and  cautious  money  lender  from  the  market 
altogether,  when  times  are  critical  and  money  is  worth 
more  than  the  law  allows  him  to  collect  for  the  use  of  it, 
and  thereby  increases  the  value  of  what  remains  in  the 
market.  Circumstances  may  induce  persons  to  pay  a  large 
rate  of  interest  for  a  short  time,  rather  than  become  de- 
faulters, or  to  purchase  some  very  valuable  cheap  prop- 
erty, or  for  foreign  remittances  to  preserve  their  credit 
abroad,  and  for  other  purposes.  Money  is  but  a  more  con- 
venient portion  of  the  circulating  medium  of  the  country 
than  grosser  materials,  when  we  speak  of  it  in  its  most  ex- 
tensive signification ;  for  then  it  embraces  every  species 
of  property  that  may  be  made  convertible  into  remittan- 
ces, whether  domestic  or  foreign.  Money  being  the  most 
convenient  medium  of  circulation,  will  still  be  used  as  the 


BTJNCOMBE^S  FREE  BANKING.  §1 

measure  of  value,  though  it  will  not  be  exported  when  bills 
of  exchange  are  cheap,  that  is,  when  the  rate  of  exchange 
is  not  so  high  as  to  make  the  exportation  of  specie  profitable. 
The  proper  business  of  bankers  is,  to  lend  money  by 
discounting  notes  ;  not  to  become  brokers  or  dealers  in  bills 
of  exchange.  But,  as  the  sale  of  bills  of  exchange,  where 
bankers  have  friends  in  a  remote  city  or  country  in  which 
the  rate  of  exchange  is  against  the  residence  of  the  bank- 
er, and  consequently  high,  it  is  often  found  the  most  prof- 
itable part  of  the  banker's  business,  and  therefore,  when 
bank  charters  do  not  prohibit  it,  the  traffic  in  these  bills  be- 
come his  principal  business.  This,  however,  prevents  the 
bank  from  doing  the  ordinary  business  of  banking  for  the 
inhabitants  of  the  place.  Firstly,  because  the  funds  of  the 
bank  are  withdrawn  from  that  neighborhood,  and  because 
the  citizens  cannot  pay  the  same  j^er  cent,  consistently,  that 
a  speculator  from  a  foreign  city  or  country  can,  who  borrows 
money  to  expend  in  the  purchase  of  wheat,  flour,  pork,  beef 
or  other  products  of  the  western  country,  to  sell  in  an  east- 
em  market,  at  which  place  he  can  as  well  pay  as  at  the 
place  where  he  borrows  the  money  ;  besides,  he  saves  the 
interest  during  the  time  it  takes  in  making  the  remittance  to 
the  bank  where  the  money  was  borrowed ;  as  well  as  hav- 
ing good  city  endorsers,  his  bills  are  worth  four  times  the 
ordinary  interest  for  the  short  loan  of  the  money.  It  is 
true,  this  is  often  complained  of  by  the  inhabitants  of  the 
place,  who  think  they  should  have  a  preference  to  foreign 
applicants  for  loans,  without  reflecting,  that  the  business  of 
the  company  is  to  make  as  much  money  as  they  lawfully 
can;  and,  that,  until  citizens  of  the  interior  can  compete 
with  eastern  speculators  in  the  rate  of  interest  they  can 
afford  to  pay,  they  cannot  expect  to  enjoy  the  same  facili- 
ties of  borrowing  money  from  incorporated  banks. 


82  duncombe's  free  baii^kino. 

And  here,  I  am  anxious  to  liave  it  observed,  that  the  true 
business  of  incorporated  banks  of  issue  is,  to  lend  their  cred- 
it as  profitably  as  they  can  for  the  stockholders,  and,  conse- 
quently, they  tax  the  people  as  much  for  the  use  of  their 
credit  as  they  lawfully  can. 

My  object  in  this  work  is  to  show,  that  the  money  por- 
tion of  the  currency  ought  no  more  to  be  under  the  control 
of  a  private  monopoly,  than  the  cotton,  flour,  lumber,  or 
any  other  portion  of  our  commodity-currency  ;  but,  that 
while  the  government  re^serve  to  themselves  the  exclusive 
privilege  of  coining  money  and  regulating  the  value  there- 
of, and  of  foreign  coins,  what  can  be  more  inconsistent  than 
to  authorize  any  set  of  men  to  issue  paper  upon  limited 
responsibility^  to  make  up  any  deficiency  that  may  happen 
in  the  precious  metals  ?  For,  although  this  imaginary  mon- 
ey is  not  made  by  law  a  legal  tender,  its  effects  upon  the 
money  market  is  nearly  equal  to  that  of  its  being  made  a 
tender ;  bedause  it  has  been  so  generally  and  freely  circu- 
lated, that  the  specie  has  been  w^lthdrawn  from  circulation. 
They  cannot  both  circulate  together  among  the  same  class 
of  citizens,  as  before  observed.  Mechanics  and  laborers 
prefer  the  precious  metals,  and  business  men  large  paper 
money,  always  convertible  at  pleasure. 

Self-love  is  the  motive  power  of  most  human  actions  ; 
and  how  is  it  possible  that  an  Incorj^orated  company,  having 
but  one  object,  the  dividends  of  the  bank  in  view,  should 
be  expected  to  spend  their  time  and  money  in  the  promo- 
tion of  the  public  good,  when  it  is  entirely  separate  and 
distinct  from  their  interests  ] 


buncombe's  free  banking.  83 


CHAPTER  VIII. 

ON    THE    IMMENSE    POWERS    OF    INCORPORATED     COMPANIES. 

The  incorporation  of  Companies  are  uniforral}'  and  avowedly  for  the  public  good— 
but  reully  for  private  ud vantages. — Incorporations  for  internal  improvements 
possess  immense  power,  turned  to  prsv.ite  advantage — Only  profitable  when  they 
pay  the  interest  in  tolls — Tho  public  arc  required  to  take  half  of  the  stock,  or 
loan  money  for  half  of  its  completion  — This  done,  their  success  is  considered 
certain — 'I'he  Company  monof)olize  the  hydraulics,  timber,  stone,  land  and 
water. — Capitalists  are  told  of  the  profits  of  the  investment — They  rise  in  the 
value  of  the  Ntoek — Large  dividends. — Municipal  Corporations  republican- 
convenient  — Banking  companies  urge  upon  the  legislature  the  necessity  of  capi- 
tal— The  danger  of  the  withdrawn!  of  the  money  of  the  place,  to  find  better  in- 
vestments.— Credit  currency  is  not  capital — See  the  private  motives  of  the  stock- 
holders— largo  dividends — a  monopoly  of  the  currency — limited  responsibil- 
ity—unlimited  control  of  tho  currency — Credit  will  pass  as  money. — Other 
similar  Institutions  will  be  mutual  in  their  forbearance. — In  case  of  hard  limes,  the 
broker  must  "wind  up  for  us,  or  we  must  vest  our  funds  in  exchanges — become 
rich  by  our  limited  liabibty — Individuals  exercise  the  powers  of  government — if 
they  do  not  coin  mouey,  they  make  their  bills  pay  debts. 

That  I  may  not  be  misunderstood,  -  allow  me  to  repeat, 
that  banks  are  always  incorporated  avowedly  for  the  public 
good ;  but  the  stock  of  these  institutions  is  only  takeh  by 
men  who  look  to  this  investment  of  capital  as  the  best  that 
offers. 

The  arguments  used  to  induce  the  legislature  to  incor- 
porate companies  are,  that  the  promotion  of  the  ^mZ>Z«c 
good,  in  a  thousand  different  ways  require  it.  If  it  be  for 
a  rail  road  or  canal,  the  legislature  are  told  that  it  will  in- 
crease the  facilities  of  trade,  lessen  the  expense  of  exports 
and  imports,  and  shorten  the  distance  between  remote 
points,  as  well  as  effect  the  rapid  rise  in  the  value  of  the 
lands  along  the  route  ;  that  splendid  villages  will  spring 
up,  as  if  by  magic,  at  its  extremities,  and  at  such  points  as 
are  adapted  to  debarkation;  in  short,  that  it  may  be  demon- 
strated to  a  mathematical  certainty,  that,  although  the  work 
may  not  pay  well  in  tolls  on  the  outset,  yet,  that  it  will  en- 
hance the  value  of  property  along  the  route,  and  increase 
the  facilities  of  trade  to  double  its  cost,  yea,  to  five  times 
the  outlay,  and  that  the  public  would  be  greatly  benefitted, 
even  although  it  should  never  pay  the  stockholders  one  pen- 


84  DUNCOMBE^S  FREE  BANKIPTG. 

ny.  To  do  so  much  good,  the  legislature  are  asked  to  take 
one-half  of  the  stock,  or  to  loan  a  large  sum  of  money  to 
the  company,  with  which  to  commence  the  work,  and  for 
the  purpose  of  inspiring  capitalists  with  confidence  in  the 
undertaking.  The  argument  succeeds — the  company  is 
incorporated.  The  law  authorizes  them  to  enter  upon  any 
man's  private  property,  examine  it,  report  upon  it,  and  if  it 
suits  their  interest  to  seize  the  same,  and  appropriate  it  to 
their  own  use,also,  to  enter  upon  his  land,  cut  histimber,quar- 
ry  his  stone,  and  convert  them  to  the  use  of  die  company  ;  and 
further,  to  use  his  water  j^rivileges — out  of  which  they 
create  new  and  valuable  hydraulic  powers — compensating 
the  owner  for  his  property  thus  taken  or  damaged,  not  ac- 
cording to  the  price  asked  by  him,  but  at  the  appraisal  of 
men.  Here,  although  justice  may  be  done  between  the 
parties,  yet  men  loose  the  rightful  disposal  of  their  private 
property,  through  the  intervention  of  the  legislature,  for  the 
benefit  of  a  private  company.     But  more  of  this  anon. 

Let  us -next  consider  what  arguments  are  used,  by  the 
friends  of  the  work,  to  induce  capitalists  to  invest  their  funds 
in  the  enterprise.  They  are,  the  length  of  time  for  which 
the  charter  is  granted,*  the  growth  and  prosperity  of 
the  country  about  it,  and  consequent  increased  business ; 
the  present  expense  of  transportation  over  that  section  of 
country,  compared  with  the  lessened  cost  and  increased  fa- 
cilities about  to  be  offered  by  the  completion  of  the  im- 
provement, and  the  consequent  increase  of  transportation 
and  business  on  the  route,  producing  large  dividends  and  a 
rapid  rise  of  the  price  of  the  stock  in  the  market  above  its 

original  cost. 

The  immense  hydraulic  pov/er  and  privileges  that  will 
be  created  by  the  canals  or  slack-water  navigation,  of  them- 
selves are  frequently   represented  as  quite  equal  to  the 


buncombe's  free  banking.  86/ 

whole  outlay  :  then  the  higli  price  at  which  the  stock  will 
sell  in  the  market,  by  which  the  money  may  be  realized  on 
any  occasion,  whenever  that  should  be  desirable  ;  besides, 
that  the  stock  may  at  any  time  be  hypothecated  for  double 
the  amount  of  money  actually  paid  in  ;  and  lastly,  that  their 
charter  will  be  renewed  again,  should  they  desire  it,  after  its 
expiration ;  or  if  the  letrislature  will  not  grant  a  new  char- 
ter they  will  have  to  pay  some  twenty  per  cent,  advance 
upon  the  amount  of  money  actually  expended,  before  they 
can  be  allowed  to  take  possession  of  the  improvement* 
Thus  the  stock  is  taken,  and  the  interest  of  the  company 
begins  to  show  itself;  but  as  there  is  such  mutual  depen- 
dence between  the  company  and  thepublic,  very  little  in- 
convenience is  really  ever  experienced  from  their  conflictT 
ing  interests. 

Municipal  incorporations,  where  all  the  inhabitants  of  a 
place  are  associated  for  local  common  purposes,  are  truly 
republican,  and  genei*ally  conducive  to  the  prosperity  of 
the  place,  and  to  the  peace  and  happiness  of  the  people. 

Let  us  now  examine  the  arguments  used  before  the  le- 
gislature to  induce  them  to  incorporate  a  banking  company. 
They  are  reminded,  that  there  are  eapitalists  who  wish  the 
same  privileges  for  investing  their  money  advantageously 
that  are  enjoyed  by  the  capitalists  in  other  towns  and  cities 
where  banks  are  established  ;  that  the  inhq.bitants  of  the 
city  or  town  require  the  use  of  the  capital,  and  all  its  bene- 
fits in  a  bank;  butthat  unless  capitalists  can  enjoy  the  same 
privileges  and  profits  for  their  money,  that  are  enjoyed  in 
other  places,  they  will,  as  a  matter  of  course,  send  their 
capital  away,  or  move  away  themselves  with  it ;  besides, 
the  business  men  of  the  place  are  compelled  to  go  to  a  dis- 
tance to  make  deposites  of  their  money,  which  they  cannot 
very  safely  keep  at  home  ;  and  when  they   have  money  to 


86  duncombe's  free  banking. 

raise  upon  any  emergency,  they  must  run  through  the  place 
to  collect  it  in  small  sums,  or  post  off  to  a  distant  bank  for  only 
a  small  loan ;  and  there  are  journeys  for  payments,  and 
postage  and  expenses  in  getting  satisfactory  endorsers, 
and  ten  thousand  inconveniences  in  living  so  far  from  a 
bank ;  and  that  the  bank  will  become  a  convenient  safe 
place  of  deposite  for  the  township  or  county  funds,  and  for 
private  funds  that  are  now  taken  into  a  distant  part  of  the 
country  at  an  expense  and  inconvenience  ;  and  that  it  can 
do  no  harm,  as  no  one  is  required  to  borrow  money  from  it 
unless  they  need  it — and  if  they  do,  then  it  is  quite  conve- 
nient. The  plenty-of-money  party  always  prevail,  and  the 
company  is  incorporated. 

Let  us  next  look  into  the  private  room  of  the  stockhol- 
ders, and'hear  their  arguments  respecting  the  new  bank  in- 
earporating  act.  Their  first  remark  is,  that  there  is  only 
limited  responsihility  required,  and  we  shall  not  be  in  dan- 
ger of  loosing  much  ;  we  shall  have  large  deposites  to  bank 
upon  soon,  and  be  able  to  commence  business  upon  the 
payment  of  a  small  part  of  our  capital ;  and  those  who 
have  not  even  the  first  instalment  can  borrow  from  a  neigh*- 
boring  institution,  and  as  soon  as  we  get  into  successful 
operation,  they  can  borrow  from  our  bank  to  pay  it  back 
again.  Thus,  by  keeping  up  a  mutual  good  understanding 
between  two  or  three  of  the  neighboring  institutions,  we 
can  borrow  money  from  them  to  meet  the  instalments  as 
they  may  be  required ;  and  by  loaning  three  dollars  for 
one  of  paid-up  capital,  we  shall  be  able  soon  to  have  a  fund 
on  hand  sufficient  to  meet  any  demand  that  may  be  made 
upon  us  by  any  other  bank  that  may  be  jealous  of  our  pros- 
perity. Besides,  we  must  have  the  revenues  and  taxes  ol 
the  country  or  city  increased,  and  the  money  deposited  with 
^.s  for  safe-keeping.     Our  bills  will  circulate  a^3  well  as  tke 


DUNCOMBE*S  FREE  BANKING.  S7 

specie  among  the  people,  and  we  shall,  by  receiving  specie 
from  the  government,  and  paying  out  paper,  be  able  coi> 
stantly  to  accumulate  specie  in  our  vaults.  Besides,  as 
other  banks  do  not  return  our  notes  upon  us  for  the  specie, 
but  keep  them  as  specie  to  bank  upon,  we  in  return  will 
do  the  same,  and  thus,  upon  any  examination  by  commis- 
sioners, we  will  be  able  to  show,  if  not  a  large  amount  of 
specie  in  our  vaults,  a  large  amount  of  the  notes  of  other 
banks ;  and  while  the  examinations  of  the  banks  are  being 
gone  through  with,  we  must  borrow  a  few  thousand  dollars 
from  our  neighboring  banks,  and  in  return  send  them  our 
specie  when  their  institutions  are  to  undergo  a  like  ordeal. 
This  is  the  system  adopted  by  bankers  in  many  parts  of 
the  country,  and  by  which  the  people,  looking  at  their  state- 
ments, given  under  the  affidavits  of  their  officers,  are  led  to 
believe  that  all  is  quite  right ;  and  even  the  inquisitive  le- 
gislature are  satisfied. 

Confidence,  say  they,  is  all  that  is  necessary,  and  we  may 
use  our  own  funds  in  a  broker's  establishment,  and  lend 
twice  as  much  as  our  own  paid-up  capital.  And  when 
times  become  hard,  and  the  neighboring  institutions  begin 
to  lessen  their  discounts,  our  broker  must  do  most  of  our 
business  at  two  or  three  per  cent,  a  month,  while  we  will 
not  discount  for  any  body  except  ourselves.  If  there  ap- 
pears something  a  little  wrong  in  evading  a  law  that  will 
not  allow  us  to  take  more  than  six  per  cent,  interest,  yet 
there  can  be  no  harm  in  the  broker's  doing  so.  If  we  do 
not  enable  him  to  make  this  profit  in  which  we  can  share, 
some  other  bank  will,  and  we  may  as  well  have  the  profit 
as  any  body  else  ;  besides,  the  people  who  wish  to  borrow, 
know  whether  money  is  worth  more  than  simple  interest  to 
them,  and  what  right  have  we  to  meddle  with  their  affairs* 
I&it  not  better  that  it  should  be  given  to  a  broker  than  foe 


88  duncombe's  free  banking. 

distilled  spirits,  as  is  too  often  done  ?  When  people  want 
money  they  will  have  it  at  any  price,  and  our  business  is  to 
make  all  the  money  we  can.  And,  with  oiily  a  limited  res- 
ponsihilityy  should  any  thing  happen,  and  we  be  compelled 
to  suspend,  or  even  to  "  wind  up,"  we  shall  alway.-j  be  the 
first  to  know  of  its  necessity.  And  whoever  knew  of 
stockholders  loosing  money  by  the  winding  up  of  a  bank, 
whether  its  operations  had  been  successful  or  otherwise? 
They  can  take  care  of  themselves.  In  fact,  we  have  every 
thing  to  expect  and  nothing  to  fear  from  the  changes  of  the 
times.  When  times  are  prosperous,  we  will  dispose  of 
stock.  When  times  are  hard,  and  stocks  fall,  we  shall  be 
able  to  purchase  again  for  half  the  money.  By  preserving 
our  credit  as  individuals,  whatever  may  be  the  fate  of  the 
bank,  we  shall  have,  for  a  few  years,  "  the  best  chances" 
in  the  neighborJiood  for  amassing  property. 

These,  with  ton  thousand  additional  arguments,  are  used  to 
induce  the  wealthy  in  the  neighborhood  to  take  stock,  (paya- 
ble in  instalments,)  and  pay  up  tlie  whole,  and  receive  an  in- 
terest for  the  amount  thus  advan(;ed  before  it  becomes  due. 

Thus  commences  a  bank  that  is  to  issue  a  portion  of  the 
circulating  medium  of  the  country — a  currency,  the  metal- 
ic  portiou  of  which  the  govcrnm  nt  reserves  to  itself  the 
right,  the  privilege,  and.  power  of  coining,  and  the  regula- 
ting of  its  value,  that  the  public  may  not  be  imposed  upon 
by  light  or  spurious  coin,  or  be  left  without  a  circulating 
medium  while  there  as  bullion  enough  for  coinage — there- 
by allowing  a  seigniorage  to  some  foreign  country,  or  to 
private  individuals  for  coining  the  currency  of  the  country 
for  them.  Whnt  would  be  said  of  a  government  that 
would  incorporate  a  comjmri.y  lolili  j^oivcr  to  coin  money ^  and 
allow  that  company  to  make  the  circulating  medium  of 
whatever  material  or  value  they  chose  % 


duncombe's  free  bankino.  89 

CHAPTER  IX. 

THE  EFFECTS  OF  ALLOYING  THE  COIN  OF  ANY  COUNTRY. 

Debasing  the  coin — nominally  raises  the  value  of  the  precious  metals — virtually 
raises  the  value  of  commoditiea. — The  gold  bill,  by  lessoning  the  quantity  of 
gold  in  ten  dollars,  raised  the  nominal  value  of  all  other  commodities  except 
sdver,  and  reduced  the  legd  value  of  that  in  the  same  proportion  that  it  nominal* 
ly  raised  the  value  of  gold. — Debasing  thecoiu  unjust. 

When  the  government  of  a  country  alloys  its  coin,  and 
debases  its  currency  by  lessening  the  value,  without  alter- 
ing the  denomination,  making  it  a  tender  for  the  payment 
of  the  same  sum  after  as  before  its  being  so  alloyed,  the 
creditor  sustains  a  loss,  and  the  public  suffer  an  injustice 
that  the  whole  commercial  world  must  reprobate.  The  act 
is  fraudulent  upon  citizens  having  particular  contracts  due 
in  coin  at  the  legal  value,  as  rents  or  long  leases  that  are 
due  annually.  How  much  more  contemptible  is  it  in  a  gov- 
ernment to  authorize  a  few  individuals,  for  the  promotion 
of  their  private  interest,  at  their  own  will  and  pleasure, 
upon  a  limited  responsihility,  to  issue  so  much  bank  paper 
to  circulate  as  money  as  shall  materially  change  its  value — 
especially  where  the  company  have  the  power  to  fix  the 
limits  of  their  own  responsibility,  and  the  extent  to  which 
they  will  inflate  the  currency,  and  consequently  the  amount 
to  which  they  will  depreciate  it ;  since  they  are  capable  of 
discounting  their  own  and  other  people's  notes,  and  of 
drawing  the  specie  out  of  the  bank,  until  there  might  not 
remain  one  shilling  in  the  dollar  of  the  security  to  the  bill- 
holder,  that  the  public  supposed  constituted  the  basis  of 
the  paper  that  they  were  receiving  as  money.  Thus  palm- 
ing their  bills  upon  a  gullible  and  unsuspecting  public, 
and  filling  their  own  pockets  with  good  money,  and  failing 
rich,  though  hundreds  should  be  made  poor  by  the  fraudu- 
lent transaction. 


90  dtjncombe's  free  banking. 


CHAPTER  X. 


THE  EFFECTS  OF  BANK  FAILURES  UPON  PUBLIC  MORALITY. 

Bank  failures,  by  their  frequency,  cease  to  de2:rade  the  stockholders. 

Familiarity  wltli  vice  lessens  its  hideous  form  that  firstly 
alarmed  us,  till  by  degrees  we  become  callous  to  the  offen- 
sive sight,  and  at  last  indifferent.  *'  Shame  being  lost,  all 
virtue  is  lost.'*  Bank  suspensions  and  bank  failures  are  not 
looked  upon  any  longer  as  disgraceful  events,  how  much 
soever  the  public  may  be  enraged  against  their  perpetra- 
tion. They  have  become  things  of  every-day  occurrence, 
and  the  wealthiest  and  most  consequential  members  of  so- 
ciety often  are  stockholders  or  directors  in  some  of  these 
insolvent  institutions.  But  since  these  speculators  have 
saved  some  money  for  themselves,  they  have  acquired  re- 
spect and  consequence  in  society.  They  feel  themselves 
above  reproach,  and  entitled  to  receive  that  respect  that 
money  always  commands. 

Now  we  have  taken  a  peep  behind  the  curtain  of  a  new- 
ly incorporated  banking  company,  where  the  initiated  only 
are  admitted,  and  witnessed  their  machinations  and  fraudu- 
lent practices,  which,  to  the  uninitiated  stockholders  and 
depositors  is  all  fair — to  them  the  capital  stock  is  truly  and 
honajide  paid  in.  Their  assets  are  professedly  fair  and 
honorable.  Their  business  moves  on  as  regularly  "  as  clock 
work." 

But  this  and  tJiat  picture  serve  to  show  the  attempts  at 
gullibility,  by  those  who  have  the  management  of  public 
money,  or  private  credit.  The  great  secret  is  to  keep  all 
they  have,  and  get  all  they  lawfully  can.  They  make  it 
the  interest  of  their  directors  to  make  as  much  money  as 
they  possibly  can  out  of  ev^ery  operation,  by  charging 
interest  from  the  date  of  the  note  left  for  discount,  although 


dttncombe's  free  banking.  91 

not  discounted  precisely  on  the  day  it  was  presented,  to  re- 
tain part  of  the  funds  in  hand  as  long  as  possible  without 
interest ;  but  to  charge  interest  on  every  dollar  for  every 
day  that  any  individual's  note  lies  over,  or,  on  balances  due, 
if  he  by  any  means  over  draws  his  account.  All  this  is 
lawful,  and  has  been  so  long  and  so  generally  practiced  by 
incorporated  banking  companies,  that  it  has  become  almost 
right. 

But  to  our  subject,  the  circulating  medium.  What  com- 
mon feeling  or  common  interest  have  we  discovered  be- 
tween the  banker  and  the  borrower — between  the  banking 
incorporated  company  and  the  public  I  None.  There  is 
none.  There  can  be  none  felt  by  institutions  formed  solely 
for  the  purpose  of  enriching  private  individuals.  But  this 
is  not  all.  This  disgraceful  limited  responsibility-princi- 
ole  holds  out  an  inducement  to  fraud,  to  conniption,  want 
of  faith,  and  utter  loss  of  confidence,  public  and  private. 
The  natural  effects  of  limited  responsibility  with  unlimited 
public  confidence,  governed  by  private  interest,  is  shown 
in  the  every-day  transactions  of  every  bank  in  community. 
They  circulate  as  much  money  as  they  can  keep  afloat,  and 
receive  their  large  interests,  dividends,  and  bonuses,  with- 
out one  thought  of  the  public  convenience.  Having  liter- 
ally flooded  the  country  with  their  paper,  and  removed 
their  deposltes  from  the  bank  to  some  eastern  city,  as  New 
York,  or  Philadelphia,  they  sell  bills  upon  them  at  a  profit : 
issue  post  notes,  or  submit  to  some  other  subterfuge,  to 
evade  the  immediate  payment  of  their  notes  in  money  on 
demand.  If  these  will  not  pass,  they  suspend  specie  pay- 
ments, and  if  they  fall  into  the  hands  of  commissioners,  or 
other  officers  who  are  or  may  be  appointed  to  wind  up  their 
concerns,  they  loose  nothing  except  their  charter  to  make 
money  upon  popular  gullibility.    But  more  of  this  hereafter. 


92  buncombe's  free  banking. 

CHAPTER  XL 

ENGLISH   AND   AMERICAN  CURRENCIES. 

A  comparison  of  the  currency  of  the  United  States  with  other  countries — especial- 
ly those  witli  whom  she  is  connected  by  commercial  relations. 

One  of  the  strongest  arguments  in  favor  of  the  circula- 
tion of  bank  paper  as  money,  is  drawn  from  the  fact,  that 
the  nations  with  whom  most  of  the  American  commerce  is 
carried  on,  use  a  paper  money  circulating  medium,  there- 
by increasing  th^  money  currency  of  those  countries  far 
above  the  actual  amount  of  precious  metals  that  circulates 
among  them.  But  while  we  admit  the  soundness  of  the 
reasoning,  so  far  as  the  comparison  holds  good,  I  am  un- 
willing to  believe,  that  because  there  are  in  common  circu- 
lation in  England  five  pound  notes,  that  have  been  tested 
by  long  experience  to  be  convenient  to  all  classes  of  citi- 
zens there,  that  one  dollar  bills  can  be  useful  in  the  United 
States,  while  even  in  France,  the  country  with  which  much 
of  our  commerce  is  carried  on,  five  hundred  franc  notes,  is 
their  smallest  denomination  of  paper  intended  to  circulate 
as  money.  Hence,  I  infer,  that  if  we  argue  in  favor  of  a 
paper  currency  in  the  United  States,  upon  the  ground  that 
paper  money  is  the  currency  of  the  countries  with  which 
we  trade,  we  ought  to  show  their  currency  to  be  paper  of 
as  small  denominations  as  circulate  among  us  ;  and  that  our 
trade  with  them,  the  rate  of  exchange,  and  the  reciprocity 
of  credit,  are  mutually  effected  by  the  currency  of  each 
country  respectively.  We  ought  rather  to  conclude,  that, 
since  England  and  France  have  found  large  bills  only  con- 
venient and  profitable  to  them,  that  we  shall  find  a  like  pa- 
per money  convenient  and  profitable  to  Americans.  I  am 
unwilling  to  admit,  that  small  bills  ar©  to  be  defended  in 
the  United  States  upon  the  ground  that  large  bills  have  sue- 


t)VNCOMBE*S  FREE  BANKING.  93 

ceeded  in  Europe  j  but  am  quite  willing  to  admit  that  the 
**  go  ahead "  character  of  the  American  people  may  be 
some  apology  for  their  so  anxiously  desiring  a  paper  curren- 
cy ;  and  that,  therefore,  bills  of  as  small  denominations  as 
circulate  in  those  countries  may  be  made  to  circulate  ad- 
vantageously in  the  United  States ;  although  I  am  inclined 
to  believe,  that,  upon  a  careful  examination  of  the  money 
currency  and  other  circulating  mediums  of  these  countries, 
as  compared  with  the  United  States, that  the  latter  does  not 
require  so  small  paper  money  as  either  of  the  former. 
England,  with  her  national  debt  of  d£800,000,000  sterling, 
requires  a  greater  quantity  of  the  smaller  paper  or  cred- 
it currency  than  France — and  far  smaller  paper  money 
than  the  United  States,  where  there  is  no  interest  on  a  na- 
tional debt  to  meet,  in  change,  quarterly ;  besides  the  debts 
of  the  United  States  are  due  in  a  foreign  country,  where  its 
bank  credit  paper  is  not  expected  to  pass,  and  where  gold 
and  silver  or  bills  of  exchange  are  the  circulating  medium, 
therefore  it  does  not  require  smaller  bank  bills  than  are  cir- 
culated in  those  countries ;  or,  if  they  are  required,  I  think 
the}'  should  not  be  of  smaller  denominations  than  twenty 
dollars.  And  in  process  of  time  even  as  small  as  these 
might  be  dispensed  with. 


CHAPTER  XII. 

ON   THE    EVILS    OF    SMALL    BILLS. 

The  injury  that  the  circulation  of  small  bills  are  to  the  banks  themselves  during 
pauics, 

A  fact,  not  generally  avowed  respecting  currency,  is, 
that  the  danger  of  a  run  upon  the  banks,  is  always  in  pro 
portion  to  the  smallness  of  the  bills,  and  the  amount  of  such 
bills  that  the  bank  has  in  circulation. 


94  buncombe's  free  banking. 

A  few  large  creditors  may  be  reasoned  with  and  satisfied, 
without  ruin  to  the  debtor,  until  specie  can  be  obtained  and 
payment  made  ;  but  small  and  numerous  creditors  must  be 
satisfied.  They  must  have  money  at  the  instant,  or  they 
will  ruin  the  institution  with  the  public.  Besides,  as  all 
the  channels  of  commerce,  domestic  and  foreign,  must  be 
filled  with  the  precious  metals  or  some  other  circulating  me- 
dium, it  is  wisdom  in  a  legislature  not  to  pass  any  laws  au- 
thorizing the  issue  of  small  bills  to  circulate  as  money,  that 
specie  may  supply  their  place.  All  the  minor  channels 
will  then  be  filled  with  gold  and  silver,  and  ready  to  sup- 
port the  failing  resources  of  the  banks  in  case  of  a  panic, 
and  thus  prevent  the  necessity  of  importing  bullion  at  a 
great  private  expense,  and  derangement  of  the  natural  com- 
mercial transactions  of  a  country. 

ON    PUBLIC    GULLIBILITY. 

The  gullibility  of  the  people,  and  blindness  of  legislators,  have  made  them  an  ^asy 
prey  to" interested  bankers  and  brokers. 

The  gullibility  of  the  people  of  the  United  States  have 
left  them  an  easy  prey  to  the  avarice  of  bankers,  and  the 
blindness  of  legislatures,  (whether  wilfully  blinded  by  self- 
interest  or  otherwise  ;)  and  has  made  them  the  tools  of  in- 
terested bankers  and  brokers,  and  led  to  the  emission  of 
bills  of  a  smaller  denomination  than  circulate  in  other  coun- 
tries, or  than  are  required  to  circulate  in  these  United  States* 


duncombe's  free  banking.  95 

CHAPTER  XIV, 
ON   THE   CURRENCIES. 

GOLD  THE  NATURAL  CURRENCY  OF  THE  UNITED  STATES. 

Gold  is  the  natural  currency  of  the  United  States — hence  the  necessity  for  small 
bills  on  account  of  the  bulk  and  weight  of  silver  is  obviated. 

Gold  and  silver,  both  being  a  lawful  tender  in  the  United 
States,  lessens  the  necessity  for  small  notes — since  the  in- 
convenience of  carrying  a  large  amount  in  silver  cannot 
be  urged  against  a  metalic  currency,  that  would  exist  if  it 
was  composed  of  that  only  ;  besides,  the  gold  bill,  by 
raising  the  value  of  gold  In  the  United  States,  when  coined 
into  eagles  and  parts  of  eagles,  has  rendered  it  the  true 
natural  currency  of  this  country  for  all  amounts  above  $2,50« 

Gold  is  the  legal  money  of  France,  but  being  under- val- 
ued by  the  mint,  it  commands  a  small  premium  in  the  mar- 
ket for  the  convenience  of  travellers ;  and  silver  is  as  truly 
the  money  of  that  nation  as  paper  is  of  the  United  States. 
The  currency  that  possesses  the  least  intrinsic  value  will  be 
pushed  forward  and  circulated,  while  the  more  valuable  is 
drawn  off  for  market  or  for  husbanding. 

ON   THE   CURRENCY    OF    FOREIGN    COINS. 

Foreign  coins  current  iu  the  United  States. — Silver  the  natural  currency  of 
England. 

Silver  is  the  legal  money  of  England  for  small  sums ; 
but  gold  and  silver  circulate  indiscriminately  among  the 
people.  Gold  circulates  by' tale,  or  at  the  market  price, 
and  English-coined  silver,  of  full  weight,  by  tale  exclu- 
sively ;  while  all  foreign  coin  is  received  only  as  bullion. 
In  the  United  States,  encouragement  has  been  given  to  the 
importation  of  foreign  coins,  by  making  them  current  in 
the    receipt  of   customs,   at  their   full  foreign  value   by 


96  duncombe's  free  banking. 

weight.  Raising  tlie  value  of  gold  at  the  mint  a  shade 
above  the  foreign  market  price,  has  given  it  a  slight  pro- 
tection against  exportation,  whenever  the  rate  of  exchange 
is  so  high  as  to  justify  the  exportation  of  specie,  hence  the 
lessened  necessity  for  small  bills  to  circulate  as  money. 

ON  THE  VALUE  OP  THE  PRECIOUS  METALS. 

Of  the  advantages  tliat  the  precious  metAls  possess  over  any  other  material  for  a 
circulating  medium. 

Gold  and  silver  possess  an  intrinsic  value  in  proportion 
to  their  abundance  in  a  country,  and  the  cost  or  labor  neces- 
sary to  their  production,  the  same  as  iron  and  other  metals. 
They  also  possess  an  additional  value  from  their  fitness  for 
certain  articles  of  ornament  and  use,  as  well  as  their  adap- 
tation to  the  use  of  a  circulating  medium,  not  only  between 
the  inhabitants  of  one,  but  those  of  different  countries.  They 
are  produced  in  various  parts  of  the  globe,  and  as  articles 
of  capital  and  industry,  they  possess  a  value,  like  other 
commodities,  dependant  upon  the  cost  of  producing  them, 
and  their  peculiar  value,  founded  upon  the  immutable 
law  of  supply  and  demand,  by  which  all  values  are  de- 
termined, whether  of  gold  and  silver  or  of  other  com- 
moditi^.  The  quantity  of  the  precious  metals  found  pre- 
vious to  the  discovery  of  America  was  so  small,  that,  by 
common  consent  throughout  Europe,  they  became  the  cir« 
culating  medium  from  one  country  to  another. 

ON  THE  COST  OP   PRODUCING  THE  PRECIOUS  METALS. 

The  cost  of  producing  gold  and  silver  bears  the  same  proportion  to  their  market 
value,  as  that  of  lead  or  iron. 

Gold  and  silver  have  ever  been  considered  the  most  in- 
viting products  of  industry  to  which  labor  and  capital  can 
be  applied ;  but,  notwithstanding,  at  times  large  quantities 
of  the  precious  metals  have  been  found,  and  a  few  individ- 


duncombe's  free  banking.  97 

uals  enriched  thereby,  yet,  if  all  the  time  spent  in  searching 
for  mines,  the  high  prices  paid  for  lands  supposed  to  pos- 
sess them,  the  rent  of  lands  on  which  they  are  found  while 
being  wrought,  the  amount  of  money  paid  for  laborer's 
wages  while  employed  in  digging  and  smelting  the  ore  and 
refining  the  metal,  the  interest  on  capital  invested,  and 
the  immense  sums  unsuccessfully  expended  in  visiting  coun- 
tries and  exploring  unknown  regions  to  discover  gold  and  ^ 
silver,  were  all  duly  taken  into  consideration,  the  cost  of 
the  precious  metals  at  this  moment  would  not  be  found  to 
be  less  than  their  present  value,  with  all  the  importance  that 
is  given  them  with  the  heads  of  kings  and  caps  of  liberty, 
with  which  coins  are  so  splendidly  embellished. 

GOLD  AND  SILVER  REAL  WEALTH,    x 

Gold  and  silver  are  real  wealth. — Bank  paper  only  imaginary  wealth. 

Hence  we  see  that  gold  and  silver  possess  an  intrinsic 
value  as  products  of  industry  with  other  commodities. 
They  are  therefore  real  wealth,  and  not  the  representatives; 
although  their  adaptation  to  currency  bv  their  uniforxnity  of 
value  throughout  the  world,  their  convenient  portability, 
malleability,  toughness  and  diirability,  may  have  enhanced 
their  current  price ;  yet,  their  value  in  the  arts  would  of 
itself  have  given  to  them  a  consequence  above  all  other 
metals. 

We  next  come  to  the  comparison  of  the  precious  metals 
with  incorporated  bank  paper,  as  that  is  now  used  as  their 
representative. 

PAPER  MONEY  NOT  WEALTH. 

Paper  money  possesses  no  intrinsic  value. — Its  legal  currency  a  fiction. 

Firstly,  pape>  money  is  of  little  or  no  intrinsic  value  to 
be  converted  into  any  other  material  than  that  of  money  ; 

I* 


98  duncombe's  free  banking. 

and  when  destroyed  or  lost,  the  whole  community  are  but 
little  damaged,  as  the  entire  loss  falls  on  the  bill-holders 
alone.  The  materials  of  which  paper  money  is  composed 
are  of  easy  access,  and  possess  no  extraordinary  properties ; 
consequently,  the  wear  and  tear  of  the  circulating  medium 
is  much  less  in  paj)er  money  than  in  the  precious  metals. 
But,  since  bank  notes  are  only  the  representative  of  money, 
and  possessed  of  no  intrinsic  value,  and  merely  the  repre- 
sentative of  capita],  their  accumulation  is  not  an  increase  of 
real  wealth,  but  only  its  representative.  Gold  and  silver 
have  their  legitimate  functions  to  perform  and  their  natural 
channels  to  occupy  ;  and  when  these  operations  are  per- 
formed by  paper  money,  its  advantages  cease. 


CHAPTER  XY. 
ON    BANKING. 

ITS  LEGITIMATE  BUSINESS. 

The  legitimate  operations  of  banking,  or  the  circulation  of  paper  money. 

Among  the  various  commmercial  and  financial  operations 
known  and  dignified  by  the  title  of  banking,  three  kinds 
only  require  a  particular  notice  ;  and,  as  they  are  distinct 
and  wholly  different  from  each  other  in  their  uses,  opera^ 
tions  and  influence,  as  well  as  their  constitutions,  they  re- 
quire particular  descriptions,  that  they  may  not  be  con- 
founded with  financial  operations  not  intended  to  be  treated 
of  in  this  place.  These  three  are,  banks  of  deposite,  banks 
of  discount,  and  banks  of  circulation. 


DUNCOMBE  S  EREE  BA^-KI^-0.  99 

OF  BANKS  OF  DEPOSITE,  DISCOUNT,  AND  CIRCULATION. 

Their  description — their  uses  and  characteristic  distinctions. 

OF  BANKS  OF  DEPOSITE. 

A  bank  of  deposlte  is  an  institution  established  for  tlie 
safe-keeping  of  coin  and  bullion,  and  the  transfer  of  accounts 
on  its  books  from  one  person  to  another ;  thereby  facilita- 
ting mercantile  transactions,  saving  the  trouble  and  expense 
of  repeated  countings  and  transportations  of  the  precious 
metals  from  place  to  place,  lessening  the  risk  and  friction, 
or  Avear  and  tear  of  the  coin — as  was  the  case  of  the  old 
bank  at  Amsterdam,  and  also  the  present  one  at  Hamburgh . 
Hence,  a  bank  of  deposite  neither  adds  to  or  diminishes  the 
currency  ;  as  the  checks,  drafts  and  credits  in  the  bank  are 
just  equal  to  the  amount  of  specie  which  depositors  have 
there  in  safe-keeping. 

OF  BANKS  OF  DISCOUNT. 

A  bank  of  discount  is  an  institution  possessing  a  capital 
in  money,  which  the  proprietors  lend  by  discounting  accep-^ 
tances  and  promissory  notes,  having  but  short  periods  to  run. 
It  also  receives  on  deposite,  at  interest  or  not,  as  the  parties 
may  agree,  the  money  of  other  people,  re-payable  on  de- 
mand or  at  fixed  periods,  which  it  lends  as  its  own  in  dis- 
counting securities.  Of  this  class  are  the  banks  in  London, 
(except  the  bank  of  England,  and  a  few  others,)  and  those 
of  most  of  the  private  bankers  on  the  continent.  Hence 
the  slight  influence  of  these  institutions  upon  the  currency 
or  credit  of  their  respective  countries.  They  do  not  in- 
crease the  circulation,  but  only  issue,  or  put  in  circulation, 
money  that  actually  existed  independent  of  any  act  of  theirs. 

BANKS    OF    CIRCULATION. 

A  bank  of  circulation  is  an  institution  established  for 


100  dukoombe's  free  banking. 

the  purpose  of  lending  credit  by  an  exchange  of  notes  be- 
tween the  banker  and  the  borrower.  The  borrower  find- 
ing that  he  can  do  better  in  the  market  with  the  well-known 
notes  of  the  banker  payable  on  demand,  than  he  can  with 
his  own,  due  a  short  time  hence,  while  the  banker,  whose 
credit  is  known  and  established,  has  no  fear  of  having  his 
notes  immediately  returned  upon  him  for  specie.  There- 
fore, for  such  interest  as  can  be  agreed  upon  between  the 
parties,  never  exceeding  the  rate  beyond  which  the  banker 
is  restricted  by  law,  he  exchanges  notes  with  the  borrower 
Here  then  is  a  new  currency  introduced,  under  the  influ- 
ence of  credit  and  private  interest.  And  let  us  see  what 
the  probable  effects  of  such  a  batik  must  naturally  be  upon 
a  circulating  medium.  Firstly,  the  banker  issues  his  notes 
cautiously,  and  only  at  short  credits,  lest  they  shoald  be  re- 
turned upon  him  in  sums  beyond  the  amount  of  specie  he 
may  have  on  hand.  Soon,  however,  he  finds  public  confi- 
dence remains  firm,  and  his  bills  circulate  freely  among  the 
conimunity,  when  he  increases  his  issues,  in  the  hope  of 
reaping  more  profits,  and  so  continues  to  increase  them  until 
all  the  channels  of  currency  are  completely  glutted.  Un- 
der all  these  circumstances,  specie  is  exported ;  and  the 
only  home  cui'rency  left  is  bank  notes.  Prices  have  risen 
nominally,  imports  have  been  made  from  abroad  to  supply 
the  increased  market  by  the  excess  of  currency ;  and  this 
expansion  of  credit  extends  its  influence  far  and  wide,  de- 
ranging the  regular  business  of  the  country,  raising  prices 
unexpectedly,  and,  in  short,  making  business  lively  and 
money  plenty.  By-and-bye  the  foreign  imports  are  to  be 
paid  for.  Bank  paper  will  not  pay  debts  in  a  foreign  mar- 
ket, and  the  note-holders  call  upon  the  banker  for  remittan- 
ces. Specie  is  ail  the  means  at  his  disposal,  every  dollar  of 
which  is  drawn  from  his  vaults,  to  meet  these  demands. 


duncombe's  free  banking.  101 

He,  in  turn,  is  compelled  to  call  upon  his  debtors  for  the 
immediate  payment  of  their  notes,  and  finds  they  have  ex- 
pended the  borrowed  money  in  the  purchase  of  inconverti- 
ble property,  (no  matter  how  valuable  or  productive,  since 
it  is  inconvertible,)  and  they  are  unable  to  meet  their  lia- 
bilities. 

Now  comes  on  a  money  pressure,  ^vith  hard  times.  Ev- 
ery man  wishes  to  borrow,  but  nobody  has  the  means  to 
lend.  The  bank  fails.  The  merchant  fails.  The  farmer  suf- 
fers. And  all  feel  the  sad  effects  of  over-issues,  and  consec- 
cutive  contractions,  uniformly  attendant  upon  a  currency 
dependant  upon  credit^  and  regulated  by  private  interest, 
A  metalic  currency  never  admits  of  such  contractive  and 
expansive  fluctuations. 

Of  this  character  are  the  nine  hundred  banks  and  branch- 
es in  the  United  States,  with  their  360  million  dollars  of 
paid-up  capital.  They  combine  all  the  powers,  privileges 
and  characters  of  these  three  kinds  of  banking,  however 
incompatible  with  each  other  they  may  appear  to  be.  Here 
begins  the  mystification  of  the  subject  of  finance ;  and  here- 
in lies  the  great  evil  in  the  currency  of  the  United  States. 
Dissimilar  things  are  confusedly  combined,  and  those  who 
attempt  to  explain  the  secrets  and  mysteries  of  currency, 
have  found  more  profit  in  their  mystification  than  in* their 
elucidation  ;  consequently  there  is  a  great  want  ofcorrect 
information  upon  the  subject.. 

BANKS    OF    DEPOSITE    AND    BANKS    OP    DISCOUNT    SAFE    AND 
HIGHLY  SERVICEABLE  TO  A  COMMERCIAL  COMMUNITY. 

No  evil  is  to  be  apprehended  from  banks  of  deposite,  or 
of  discount,  while  they  are  kept  within  the  sphere  of  well- 
established  principles.  But  change  their  character  so  as  to 
authorize  individuals  concerned  in  them,  to  issue  according 


102  duncombe's  free  banking. 

to  their  will  and  pleasure,  such  sums  as  they  may  find  it  to 
their  interest  and  convenience  to  circulate,  and  the  useful- 
ness of  these  banks  are  soon  lost  in  the  uncertainty,  insta- 
bility and  dangerous  fluctuations,  which  a  few  interested 
individuals  have  the  power  to  impart  to  the  currency,  and 
consequently  to  inflict  upon  the  community. 

OF  CREDIT  COMMERCIAL  BANK  PAPER. 

A  bank  of  credit  circulation,  to  be  a  useful  institution, 
should  be  confined  to  commercial  transactions.  The  notes 
to  be  discounted,  should  be  exclusively  business  notes ;  and 
should  be  composed  only  of  checks,  drafts,  bills  of  ex- 
change, and  of  the  exports  and  imports,  which  constitute, 
with  the  addition  of  the  precious  metals,  the  basis  of  the 
exchanges,  being  part  of  the  transferable  commodity-cur- 
rency of  the  country  and  not  the  money-currency.  And 
here  let  me  remark,  that  the  money-currency  of  a  coun- 
try should  always  possess  the  qualities  of  specie,  that  of 
convertibility  and  uniformity  of  value  ;  which  can  nev- 
er be  given  to  any  portion  of  a  circulating  medium, 
that  has  to  be  converted  into  coin  before  it  can  be  ap- 
plied to  the  entire  purposes  of  money.  The  money-cur- 
rency, therefore,  should  never  be  connected  with  commer- 
cial transactions,  but  should  always  be  a  convertible  circula- 
ting medium,  unconnected  with  any  contingency  of  credit 
or  interest,  either  of  many  or  of  a  few  individuals,  or^any 
circumstance  by  which  a  possibility  of  a  defeat  or  delay  of 
payment  can  be  effected. 

The  individuals  entrusted  by  the  public  in  the  manage- 
ment of  that  part  of  the  currency  of  the  country  that  con- 
stitutes the  bank  paper  portion,  should  be  only  men  of  the 
highest  reputation  for  honor,  integrity  and  punctuality,  as 
well  as  being  men  cautious  in  their  business,  temperate  in 


duncombe's  free  banking.  103 

their  habits,  and  unencumbered  by  any  connection  with 
speculations  of  a  doubtful  nature,  and  who  should  not  only 
be  holden  to  the  whole  amount  of  their  private  fortunes, 
but  who  should  give  good  security  for  all  money  that  may  pass 
through  their  hands,  and  be  strictly  prohibited  from  discount- 
ing paper  in  which  any  director  has  an  interest  either  direct- 
ly or  indirectly. 


CHAPTER  XVI. 

ON  THE    LIMITED    RESPONSIBILITY  OF   BANK  DIRECTORS  AND 
STOCKHOLDERS. 

Why  should  bank  directors  and  stockholders  be  exempt 
from  the  common  responsibility. and  unlimited  individual 
liability,  to  which  parties  to  every  contract  subject  the  pri- 
vate individuals  concerned  therein  1 

I  cannot,  for  the  life  of  me,  divine  an  answer  that  would 
be  at  all  satisfactory  to  Americans  ;  and  especially  to  those 
whose  business  is  impaired  and  interest  endangered  by  the 
limited  responsibility  of  those  who  issue  their  own  notes  to 
circulate  as  money.  Certainly  there  is  nothing  found  in  the 
moral  law — upon  which  all  positive  enactments  are  profes- 
sedly founded.  There  can  be  nothing  in  the  character  of 
the  parties  composing  banking  incorporations,  that  should 
entitle  them  to  this  special  privilege;  because  they  are 
formed  of  any  class  of  citizens,  who  may  possess  a  little 
cash,  and  are  desirous  of  becoming  stockholders  in  banks. 

To  justify  this  limited  liability  he£oTe  the  public,  recourse 
must  be  had  to  the  most  refined  subtleties,  artificial  expe- 
dients, and  sophistical  reasoning ;  for  bank  stockholders 
will  hardly  avow  the  only  true  reason  that  can  be  assigned, 
that  is,  the  privilege  of  their  order. 


104  DUNCOMBE*S  FREE  BANKING. 

Wealth  has  always  been  privileged,  and  under  the  guise 
of  public  good,  seeks  its  own  advancement  by  extraordina- 
ry requirements. 

The  principle  oi  limited  liability,  having  once  been  ce- 
ded to  the  wealthy  and  to  banking  monopolies,  privilege 
usurps  the  place  of  right.  The  true  ground  of  perfect  free- 
dom is  perfect  responsibility,  Liberty  and  liability  go 
hand  in  hand.  Rights  should  only  be  enjoyed,  upon  the 
condition  of  the  full  performance  of  duties.  Banking 
companies  can  show  no  better  grounds  to  distinction,  than 
merely  their  claim  to  be  wealthy. 

The  public  should  be  cautious  in  conferring  upon  bankers 
any  peculiar  advantages.  For  the  moment  they  do  it  they 
cede  to  them  the  additional  dignity  of  a  privileged  order, 
viz :  they  sell  them  the  right  to  coin  money — and  then  re- 
lease them  from  tl^e  responsibility  that  the  government 
claims  of  persons  employed  in  the  United  States'  mint ; 
and  even  from  the  ordinary  responsibility  of  common  con- 
tracts !  Such  madness  is  unheard  of.  Such  credit  power 
never  before  known. 


CHAPTER  XVII. 

ON   THE    LIMITED  RESPONSIBILITY  OF  CHARTERED  BANKS. 

Limited  responsibility  is  directly  at  variance  with  all  the  principles  of  free  trade 
and  free  banking. 

The  breath  of  free  trade  and  free  banking  is  stifled  by 
any  legal  restraint  from  the  ordinary  responsibility  of  all 
men.  The  first  principle  of  free  trade,  or  of  free  banking, 
being  the  most  perfect  and  unlimited  responsibility,  and 
that  of  private  individual  and  unlimited  responsibility  the 


I 


DtJNCOMBE  S  FREE  BANKING.  105 

basis  of  all  financial  operations,  no  man  or  body  of  men 
can  be  released  from  them  except  by  positive  legal  enact- 
ments. 

It  requires  the  force  of  law  to  release  the  privileged  or- 
der of  bankers  from  the  universal  liability  that  accompa^ 
nies  all  contracts  and  agreements,  as  well  as  all  promises 
to  pay  money. 

If  it  be  urged,  that  men  who  entrust  their  funds  to  the 
management  of  clerks  and  salaried  officers,  are  frequently 
less  faithfully  served  than  they  would  be  if  they  took  the 
entire  management  of  their  affairs  into  their  own  hands, 
the  argument  would  be  in  favor  of  their  entire  responsibili- 
ty rather  than  of  their  limited  liability,  as  the  only  security 
of  the  bill-holder  is  the  responsibility  of  the  institution  and 
that  of  the  stockholders.  If  the  stockholders  are  not  lia- 
ble in  their  individual  capacities,  then  the  security  of  the 
bill-holder  vanishes  like  smoke. 

If  they  intend  to  deal  honestly,  and  expect  people  to  re- 
ceive their  promiscs-to-pay  as  money,  is  it  wonderful  that 
the  bill-holders  in  their  turn,  should  expect  them  to  be 
equally  responsible  with  themselves  1  The  endorsers  and 
makers  of  notes  due  to  the  bank,  even  those  who  have  had 
no  benefit  or  interest  in  the  transaction,  are  each  holden  to 
the  utmost  farthing  of  their  private  property,  for  the  whole 
amount  of  note  or  notes  so  given ;  and  yet  the  -privileged 
party  require  that  tltey^  themselves,  should  only  be  held  re- 
sponsible to  a  given  amount,  (which  is  the  real  or  imaginary 
capital  invested  in  the  institution,)  still  they  expect  the  pub- 
lic to  receive  their  notes  upon  trust,  and  circulate  them  as 
money. 


i06  dtjncombe's  free  banking. 

ON  THE  EXCHANGE  OF  NOTES  WITH  BANKS. 

Men  must  be  truly  infatuated  who  will  exchange  notes  with  a  banker,  and  givef 
good  security  for  their  payment  and  pay  interest  upon  the  same  in  advance, 
and  not  require  the  banker  to  give  equally  as  good  security  for  the  redemption  of 
his  notes,  in  return. — This  practice  is  truly  a  comment  upon  republican  institu- 
tions. 

The  bandage  here  drawn  over  the  eyes  of  the  public 
mu8t  be  too  thin  not  to  be  seen  through  by  every  person 
who  takes  the  trouble  to  look  through  the  veil.  If  they 
claim  that  they  are  released  from  personal  liability,  by  the 
special  law  of  partnerships,  let  us  look  again  at  that  law, 
and  see  when,  where  and  how  it  interferes  with  the  com- 
mon principle  of  unlimited  liability. 

On  the  slightest  reflection,  it  must  be  obvious,  that  limi- 
ted liability  is  a  privilege  that  has  not  the  slightest  founda- 
tion in  natural  right. 

The  general,  if  not  the  universal  rule,  of  commercial 
transactions,  is,  that  every  individual  is  liable  to  the  full  ex- 
tent of  his  means  for  engagements  entered  into  by  himself, 
or  on  his  behalf,  or  jointly  with  others  ;  and  it  is  only  by  the 
intervention  of  a  special,  that  he  can  be  shielded  from  the 
more  general  law.  **  Obligation  to  action  and  rectitude  of 
action,  are  obviously  coincident  and  identical." 

Legal  liability  should  be  commensurate  with  moral  obli- 
gation. The  efficient  principle  of  liability  is  highly  con- 
servative, and  one  from  Avlilch  men,  singly,  or  in  their  asso- 
ciate capacity,  should  never  feel  themselves  freed.  Upon 
this  principle  rests  the  beneficent  doctrines  of  commercial 
freedom. 

Private  interest,  the  love  of  gain,  and  the  spirit  of  enter- 
prise, will  be  sufficient  to  Induce  capitalists  to  make  the  ne- 
cessary investments,  to  carry  on  whatever  trade  in  bank- 
ing the  currency  may  require,  under  unlimited  responsibili- 
ty.    The  spirit  of  speculation  requires  no  new  arid  improp- 


buncombe's  free  baxkixo.  107 

er  stimulus  to  excite  it  to  action  :  it  is  always  ready  to  em- 
brace every  favorable  opportunity  of  exerting  itself.  Limi- 
ted responsibility  has  a  tendency  to  elicit  a  spirit  of  gam- 
bling. 

Some  one,  somewhere,  remarks  with  much  appropriate- 
ness, that,  "  if  the  principles  of  free  trade,  which  are  but 
those  of  justice,  of  equality,  and  of  common  sense,  do  not 
admit  of  unnecessary  restraints  upon  the  liberty  of  human 
actions,  much  less,  when  properly  understood,  can  they 
sanction  or  tolerate  a  limited  individual  liability.'* 

PROMISES  TO  PAY  MONEY,  NOT  MONEY. 

Bills  promising^  to  pay  should  never  be  received  as  money,  unless  their  eouvertibili- 
ty  is  secured  to  the  bill-holder  beyond  the  possibility  of  defeat. 

Supposing  partnerships  for  manufacturing,  or  commer^ 
cial  purposes,  to  admit  of  limited  responsibilities  and  lia- 
bilities, where  the  parties  are  the  only  persons  directly  in- 
terested in  the  result,  does  it  follow  that  a  trade  in  promis- 
es-to-pay  on  paper,  where  the  partners  are  the  least  liable 
to  loss,  and  where  the  public  are  the  one  party  making  no 
profit  in  the  business,  and  so  situate  as  to  be  compelled  to 
receive  these  promises-to-pay  as  money  or  cease  to  do  busi- 
ness, should  be  placed  upon  the  footing  of  co-partnerships, 
where  all  the  parties  concerned  have  the  means  of  know- 
ing the  amount  of  risk  they  run,  and  when  they  have  a 
prospect  of  gain  in  view  in  the  formation  of  the  company, 
and  conduct  of  their  business  '? 

The  trader  in  promises-to-pay,  which  require  little  ex- 
pense to  manufacture,  should  never  be  placed  upon  the 
same  footing  with  the  exchanger  of  material  products,  nor 
his  issues  to  the  expansive  powers  of  private  ambition ; 
especially,  when  it  is  recollected  that  these  promises-to-pay 
pn  paper  are  to  be  the  standard  by  which  the  value  of  all 
material  products  are  to  be  estimated*     When  will  the  fal' 


lOS  duncombe's  free  banking. 

lacy  of  calling  promises-to-pay  by  the  interesting  title 
money ^  be  exploded  ]  and  when  will  the  public  understand 
that  promises-to-pay  coin  are  not  coin,  and  ought  not  of  right 
to  be  ranked  as  money,  any  more  than  individual  notes, 
bond«  or  mortgages,  containing  promises-to-pay  coin,  should] 
as  many  of  these  are  far  better  secured  than  bank  note 
promises-to-pay,  and  less  liable  to  be  defeated,  yet  they  are 
seldom  dignified  by  the  appellation  of  money. 

ON  PERFECT  INDIVIDUAL  LIABILITY  OF  BANKS. 

Private  Banks  and  Joint  Stock  Banking  Companies,  like  those  of  Scotland,  require 
summary  Bankrupt  Laws  to  render  them  safe  and  beneficial  to  the  public  ;  even 
although  they  are  based  upon  the  broad  principles  of  perfect  individual  lia- 
bility. 

In  Scotland,  and  other  places  where  Joint  Stock  Com- 
panies are  organized,  and  administered  upon  the  sound  prin- 
ciple of  the  liability  of  each  partner  to  the  whole  extent  of 
his  fortune  for  the  whole  debts  of  the  company,  the  note- 
holders have  had  better  security,  and  the  bank  paper  a  pro- 
portionately better  circulation — there  have  been  fewer  fail- 
ures or  suspensions — the  share-holders  have  more  uni- 
formily  received  large  dividends,  while  they  have  saluta- 
rily restrained  the  excessive  expansions  of  the  currency ; 
at  the  same  time  proving  the  universal  benefit  of  entire  re^ 
sponsibility  of  all  the  parties  concerned  in  the  institution  as 
stockholders,  directors,  clerks  or  agents,  where  they  have  a 
discretionary  power  over  the  issues  of  the  bank,  and  are 
responsible  for  the  redemption  of  their  notes  to  the  whole 
amount  of  their  private  fortunes — the  fear  of  loss  always 
nicely  balancing  the  love  of  gain.  But  even  this  responsi- 
bility of  partners  or  stockholders,  I  foresee,  would  be  lia- 
ble to  serious  objections,  some  inconveniences,  and  much 
liability  to  fraud — for  promises-to-pay  coin  of  the  highest 
value  on  paper  of  no  value,  holds  out  strong  temptations  to 
equivocation,  and  to  excessive  issues  in  the  hope  of  gain  ; 


duncombe's  free  banking.  109 

often,  no  doubt,  with  the  firm  belief  of  the  ability  of  the  in- 
stitution honestly  and  faithfully  to  meet  her  liabilities  punc- 
tually. 

But,  when  times  change,  and  the  funds  of  the  bank  are 
materially  diminished  by  losses,  or  by  the  suspensions  of 
payment  of  other  companies,  or  of  individuals  who  may 
hold  a  large  portion  of  their  funds  temporarily,  it  is  easily 
seen  how  individual  liability  may  be  evaded  by  the  transfer 
of  the  stock  of  the  bank  to  minors,  to  **  men  of  straw,"  or 
to  non-residents  ;  and  in  thousands  of  ways  evading  the 
liability  of  their  private  fortunes  for  the  demands  against 
the  bank. 

If  to  avoid  this  fraudulent  transfer,  you  make  the  stock- 
holders who  firstly  subscribe,  and  those  who  receive  trans- 
fers, severally  holden,  the  stock  would  not  be  likely  to  be 
taken.  Men  of  large  capital  would  fear  to  become  stock- 
holders in  an  institution  from  which  their  private  fortunes 
could  not  be  released,  should  they  desire  to  sell  and  trans- 
fer their  stock,  and  be  no  longer  connect<3d  with,  or  respon- 
sible for,  the  debts  of  the  institution. 

If,  to  avoid  fraud,  you  should  only  hold  the  stockholders 
responsible  for  all  issues  made  during  the  time  they  held 
their  stock,  much  perplexity  would  naturally  arise  in  ascer- 
taining what  amount  of  unredeemed  bills  persons  having 
sold  and  transferred  their  stock  were  respectively  liable 
for.  Again,  if  you  limit  the  stockholders  to  a  given  tim^ 
after  they  have  transferred  their  stock,  whether  that  time 
be  long  or  short,  the  liability  may  be  avoided.  The  natural 
result  would  be,  that  the  uninitiated  stockholders  .and  tKe 
bill-holders  would  suffer  by  having  to  pay  up  all  deficien- 
cies, while  those  who  had  enjoyed  the  profits  would  escape. 

But  the  plan  I  propose  of  removing  the  temptation  to 
frauds  and  to  over-trading  in  paper  money,  would  protect 


110  duncombe's  free  banking. 

tlie  bill-holder,  by  preventing  the  danger  of  over-issues  ; 
for  when  there  is  no  over-expansion  of  the  money  curren- 
cy, there  is  nothing  to   fear  from  oppressive    contractions. 


CHAPTER  XVIII. 
FREE  BANKING. 

THE    people's    system    OF    BANKING    REQUIRES    UNLIMITED 

RESPONSIBILITY,  WITH  GOOD  SECURITY  FROM  THE  DIRECTORS 

FOR  ALL  MONEY  THAT  PASSES  THROUGH  THEIR    HANDS. 

The  people  should  elect  the  directors  of  banks  as  they  elect  the  most  numerous 
branches  of  their  legislatures. 

The  directors  should  have  fixed  salaries  for  their  servi- 
ces, (neither  to  be  increased  or  diminished  during  their  terms 
of  service.)  Their  duties  should  be  clearly  defined.  They 
should  give  sufficient  security  for  the  faithful  discharge  of 
their  duties,  and  the  prompt  payment  over  to  their  succes- 
sors in  office  of  all  monies  and  property  of  the  bank  in  their 
possession. 

Their  responsibility  to  the  public  will  increase  and  se- 
cure their  circumspection,  prudence  and  good  management, 
and  consequent  enlargement  of  public  confidence. 

The  individual  liability  of  the  directors  will  sharpen 
their  sagacity  and  caution,  and  induce  the  strictest  attention 
to  the  interests  of  the  institution,  as  well  as  to  the  honorable 
and  fair  accommodation  of  the  borrowers. 

Excessive  expansions  of  the  currency  and  over-issue« 
would  be  prevented ;  as  they  would  have  two  positive 
limitations  beyond  which  they  could  not  pass.  In  the  first 
place,  they  could  not  issue  more  paper  than  was  apportion- 
ed to  them  by  the  state  bank  of  issue,  for  circulation.     In 


buncombe's  free  banking.  111 

the  second  place,  they  could  not  issue  that  amount,  unless 
they  had  one-third  part  of  the  amount  in  specie  actually  in 
their  vauits  at  the  time  of  their  issues. 

How  widely  different  is  the  situation  of  a  responsible  di- 
rector of  a  bank,  having  given  good  security  for  the  faithful 
performance  of  his  duties,  and  who  has  no  interest  in  the 
dividends,  or  amount  of  business  done,  but  whose  direct 
and  private  interest  is  in  the  manner  in  which  that  business 
is  done,  from  that  of  one  whose  interest  consists  of  dividends, 
bonuses,  and  profits,  and  where  the  stockholders  and  direc- 
tors have  only  a  limited  liability,  and  their  interests  depend 
upon  such  dividends,  bonuses  and  profits  as  are  dependant 
upon  the  amount  of  business  done  by  the  institution.  It  is 
of  no  great  moment  to  the  latter,  whether  the  institution 
possesses  any  character  for  aught,  save  large  dividends ;  or 
whether  the  public  be  or  be  not  accommodated  to  their  sat- 
isfaction, provided  the  directors  and  stockholders  are  largely 
benefitted.  The  gain  and  profits  of  such  a  bank,  to  the  issuer 
is  immediate,  considerable  and  certain,  whilst  the  cost  of  the 
production  of  his  paper  money  is  relatively  insignificant;  and 
the  loss  of  profit  consequent  upon  a  reaction,  is  distant, 
contingent  and  uncertain — it  may  be  avoided — it  may  be 
thrown,  as  it  usually  is,  upon  the  shoulders  of  the  public. 
For,  in  but  very  few  instances,  is  the  return  of  paper  upon 
the  issuer  attended  with  positive  loss  to  the  banker.  The 
temptation  to  over-issues,  therefore,  succeeeds. 

The  losses  of  the  bank  consists  in,  and  are  principally 
composed  of,  a  diminution  of  anticipated  profits.  The 
elected  director,  who  has  given  security  for  the  perfgrmance 
of  his  duties,  cannot  be  guilty  of  any  malversation  without 
being  accountable  in  two  ways  ;  firstly,  on  his  bonds,  with 
his  sureties  ;  secondly,  to  the  public,  through  the  ballot-box- 
es, at  the  ensuing  election  of  directors. 


112  duncombe's  free  ba^^king. 

Hence,  there  exists  every  inducement  to  incorporated 
banking  companies,  with  limited  liability,  to  lend  their 
credit,  and  to  increase  the  supply  of  their  paper.  Their 
private  interest  stimulates  them  to  an  expansion  of  the  cur- 
rency, by  bank  credit,  in  form  of  bank  notes  ;  which,  to 
the  borrower,  is  just  as  available  as  capital,  and  to  the  issuer 
a  source  of  profit  practically  unlimited,  so  long  as  the  sol- 
vency of  the  bank  is  thought  not  to  be  impaired,  or  in  other 
words,  so  long  as  the  fund  of  public  gullibility  remains 
available.  "  Hence  the  constant  tendency  of  banks  is,  to 
lend  too  much,  and  to  put  too  many  notes  in  circulation  ;'' 
but  which  may  happily  be  obviated,  by  removing  from  the 
director  private  interest  in  the  amount  issued,  and  by  in- 
creasing his  responsibility  in  the  faithful  and  popular  dis- 
charge of  his  duties. 

THE    PROPOSED     PLAN  OF  FREE    BANKING     SHOULD    NEITHER 

EXPAND  ^OR  CONTRACT  CURRENCY,  NOR  HAVE  ITS  CONVERTI- 

BILITV  QUESTIONABLE. 

It  is  a  clear  proposition,  that  paper,  perfectly,  really  and 
thoroughly  convertible  as  this  proposed  must  always  be, 
can  neither  expand  nor  contract  the  general  mass  of  the 
currency  to  an  amount  permanently  greater  or  less  than  it 
would  be  with  a  medium  exclusively  metalic. 

If  the  amount  of  precious  metals  in  the  United  States 
was  sufficient  to  fill  the  channels  of  commerce,  there  would 
be  no  occasion  to  issue  paper  to  circulate  as  money,  since  it 
would  only  occupy  such  channels  as  would  have  been  filled 
with  the  precious  metals.  Therefore,  the  average  quantity 
of  money,  the  value  of  commodities,  and  the  prices  of  real 
estate,  will  be  nearly  the  same,  whether  the  currency  con- 
sists of  convertible  paper  and  coin,  mutually  interchange- 
able for  each  other,  or  of  coin  alone.     The  system  propo- 


duncombe's  free  banking.  113 

sed  would  render  the  paper  portion  of  the  money-currency 
perfectly  convertible,  which  can  hardly  be  said  to  be  the 
situation  of  any  of  our  present  incorporated  bank  paper. 
For,  since  their  numerous  failures,  suspensions,  and  eva- 
sions of  payment,  some  slight  doubt  must  always  exist,  as 
to  the  continuance  of  the  convertibility  of  the  paper  of 
even  the  most  solvent  banks,  under  a  limited  responsibility, 
while  it  is  subject  to  the  control  of  private  interest  and  cred- 
it influence. 

The  issuing  of  post  notes,  due  at  a  long  period  hence,  is 
a  subterfuge  of  the  banks  to  augment  their  credit  and  in- 
crease their  profits ;  and  although  it  may  not  materially  in- 
fluence the  whole  mass  of  currency,  when  considered  sepa- 
rately from  the  money  portion,  yet,  when  claimed  to  be  a 
part  of  the  money  of  the  country,  it  is  destructive  of  all 
the  metalic  character  of  the  paper — its  convertibility,  sta- 
bility, uniformity,  and  its  punctuality — that  is  uniformily 
attached  to  the  money  composed  of  the  precious  metals. 

ON  FREE  REPUBLICAN  BANKING. 

In  the  United  States,  where  perfect  liberty  and  equality  in  matters  of  religion  and 
literature  prevail,  the  currency  of  the  country  ought  to  be  free»  and  perfectly 
convertible,  and  as  republican  as  the  other  institutions  of  the  country. 

A  great  desideratum  among  financiers  and  writers  upon 
currency  has  ever  been,  to  separate  the  incompatible  func- 
tions of  banks  of  issue  from  those  of  discount.  This  plan 
provides  most  effectually  for  their  divorce.  In  fact,  one  of 
the  leading  objects  of  the  measure  under  consideration,  is, 
the  restricting  the  supply  of  paper  money  to  the  actual  de- 
mand for  it,  in  exchange,  and  as  an  actual  representative  of 
specie,  rendered  indispensably  necessary  to  the  success  of 
American  enterprise,  by  the  genius  of  their  government, 
which,  by  its  free  and  living  principles  inspires  an  almost 
enthusiastic  ambition  into  every  citizen, 


114  dtjncombe's  free  banking. 

The  great  and  glorious  Declaration,  that  "  all  men  are 
born  free  and  equal,"  is  understood  by  the  Americans,  in 
its  most  extensive  signification,  and  they  sincerely  feel  that 
they  are  truly  free  and  equal  in  the  pursuit  and  enjoyment 
of  wealth,  happiness,  honor,  offices,  and  of  religious  and 
moral  education.  Hence  arises  their  laudable  ambition, 
and  noble  enterprise  in  every  lawful  pursuit  and  employ- 
ment, likely  to  give  honorable  distinction,  promote  wealth, 
produce  enjoyment,  extend  their  circle  of  respectable  ac- 
quaintances, the  knowledge  of  their  country,  of  mankind, 
and  the  world  at  large. 

The  free  exercise  of  religion  in  the  United  States  has 
also  done  much  to  inspire  her  citizens  with  their  distinguish- 
ing characteristic  go-ahead  principle. 

The    religion  of  Jesus  Christ  ever  recognized  the  doc- 
trine of  equality  and  of  liberty.     And  the  precepts  and  ex- 
amples of  the  blessed   Savior  of  mankind  in  this  respect,, 
far  surpasses  all  other  aphorisms  and  examples  that  have  , 
ever  been  handed  down  for  the  civil  or  moral  government 
of  the  world.  . 

This  love  of  liberty,  and  respect  for  the  opinions  and 
feelings  of  others,  enriches  American  society  beyond  that 
of  all  other  countries,  in  the  "  home  feeling"  that  they  en- 
joy, even  among  strangers  where  their  business,  interest,  or 
amusement,  leads  them.  The  privilege  they  take  of  ask- 
ing questions,  and  talking  of  themselves  and  friends,  upon 
even  slight  acquaintance,  although  it  may  appear  officious, 
presuming,  and  obtrusive  to  strangers,  upon  their  first  ini- 
tiation into  American  society,  yet,  after  all,  to  persons  whose 
political  institutions,  religious,  literary  and  moral  education 
have  taught  them  equality  and  liberty,  even  this  freedom 
of  declaration  and  enquiry  leads  to  improvement  in  various 
ways,  that  the  formal  habits  of  foreign  courts  do  not  admit, 


duxcombe's  free  banking.        115 

where  every  person  has  his  own  particular  sphere  marked 
out  to  him  at  his  birth,  and  in  which  he  must  remain  through 
life,  unless  he  falls  by  crime  or  misfortune  from  his  station — 
for  he  can  never  hope  to  rise  above  that  rank  except  by 
some  fortuitous  event. 

True,  there  are  many  honorable  instances,  even  in  Eng- 
land, of  persons  born  in  comparative  obscurity,  who 
have  risen  to  wealth,  and  to  places  of  power  and  profit 
under  the  government.  But  in  America,  such  things 
are  common  and  of  daily  occurrence,  and  looked  upon  as 
matters  of  course.  Here  is  a  case  in  point :  it  was  not  un- 
til the  late  election,  that  one-tenth  part  of  the  people  of  the 
United  States  knew  that  their  Chief  Magistrate,  Martin 
Van  Buren,  was  a  self-made  man — that  he  was  bom  of 
plebian  parentage,  and  that,  with  the  blessing  of  heaven 
and  his  own  exertions,  without  the  aid  of  powerful  friends 
at  court,  he  had  risen  to  fill  the  highest  office  in  the  gift  of 
he  people.  The  people  in  the  United  States  are  the  sover- 
eign power — and  from  them,  either  directly  or  indirectly, 
flow  all  the  gifts  of  office,  honor  and  power  ;  and  hence  the 
importance  of  its  currency  being  purely  republican,  and 
free  from  politics,  commercial  credit,  or  foreign  financial  in- 
fluence. It  should  be  as  republican  as  their  religion,  litera- 
ture, or  politics.  If  this  was  the  case,  the  political  ma- 
chinery of  the  government  would  move  smoothly  on,  and 
it  would  soon  be  emphatically,  what  its  inhabitants  now 
claim  it  to  be,  *'  the  land  of  the  free  and  the  home  of  the 
brave.** 


^MVEjJsiTT  OF 


116  DUNCOMBE^S  FREE  BANKING. 


CHAPTER  XIX. 

A  LARGER    CIRCULATING    MEDIUM    THAN  THE    PRECIOUS    ME- 
TALS   NECESSARY. 

The  spirit  of  American  enterprise — The  free  principles  of  the  American  govern- 
ment— The  existing  state  of  our  commercial  relations  with  foreign  countries — 
The  credit  character  of  their  currencies— and  the  situation  of  existing  American 
contracts — all  demand  a  larger  circulating  medium  than  the  precious  metals  at 
present  furnish. 

1  have  said  that  a  paper  currency  was  rendered  natural, 
if  not  necessary,  to  the  American  people,  by  the  elementa- 
ry principles  of  their  government ;  and  I  will  here  add,  by 
their  habits  of  business,  superior  enterprise,  and  "  go 
ahead '^  character,  and  their  existing  contracts,  both  at  home 
and  abroad  ;  to  which  may  be  added,  the  influence  of  the 
present  currencies  of  those  foreign  countries  with  whom 
American  commerce  is  carried  on,  as  well  as  the  credit 
capital  and  credit  confidence  that  pervades  the  Union. 
Cash  should  never  be  rsed  as  capital. 

TO  PREVENT  IMPROPER  EXPANSIONS  OF  THE  CURRENCY. 

To  prevent  the  improper  exi)ansions  of  the  currency,  the  power  to  issue  bank  paper 
must  be  separated  from  the  banks  of  discount — the  free  exportation  of  specie 
must  not  be  interfered  with — the  directors  of  banks  of  discount  must  have  no 
private  interests  in  the  discounts  or  dividends  of  the  bank — nor  should  discounts 
at  any  time  be  made  upon  evidences  of  debt  of  any  kind,  but  only  upon  the  spe- 
cie actually  in  the  vaults  of  the  bank  at  the  time  of  the  discount. 

A  subject  of  the  most  vital  importance  to  the  community, 
with  regard  to  the  currency,  is  its  constant,  universal  and 
uniform  convertibility,  under  every  circumstance,  contin- 
gency of  trade,  commerce  or  exchange.  To  obtain  this 
desirable  o^  >ject,  remove  the  private  interests  of  the  direc- 
tors from  the  discounts,  by  prohibiting  them  from  discount- 
ing paper  on  which  any  director's  name  is  given,  either  as 
principal  or  surety — and  remove  the  interests  of  the  direc- 
tors from  the  dividends  ;  separate  banks  of  issue  from  those 
of  discount — restrict   their   discounts   to  the  proportionate 


DUNCOMBE  S  FREE  BANKING.  117 

actual  amount  of  specie  in  their  vaults  at  the  time  of  the 
discount;  and  isssue  only  large  bills;  and  you  will  have  a 
key  to  the  great  secret  for  establishing  a  sound  currency 
suitable  for  a  free  and  enlightened  people. 

THE    ELECTION    OF    DIRECTORS. 

The  election  of  all  the  directors  of  all  the  banks  by  the  people,  without  aijy  refer- 
ence to  their  being  stockholders  or  not,  will  render  the  currency  truly  republican, 
as  well  as  uniformly  couvertible. — Ahva}'^  reserving  to  the  people  the  power  to 
increase  the  circulating  medium  whenever  foreign  convulsions  or  domestic  afflic- 
tions shall  render  it  necessary. 

The  election  of  the  directors  of  the  United  States  bank 
of  issue,  will  render  the  first  link  in  the  chain  of  money- 
currency  completely  republican.  Their  business  being 
unconnected  with  the  discount  of  notes,  or  the  business  of 
brokers  or  exchangers  of  money, they  will  occupy  themselves 
in  learning  the  amount  of  money-currency  necessary  to  sup- 
ply the  actual  demand  in  the  United  States,  as  connected 
with  the  commercial  world,  and  in  their  domestic  com- 
merce at  home. 

They  will  be  able  to  bank  upon  so  much  of  the  specie  as 
would  be  actually  necessary  to  make  up  the  deficiency  of 
the  precious  metals,  and  no  more.  They  should,  and  un- 
doubtedly would,  understand  the  importance  of  contract- 
ing their  issues  of  money-currency  in  times  of  plenty  and 
prosperity ;  when  convertible  property  and  credit-curren- 
cy, under  private  interest,  were  most  abundant;  as  by  that 
means  they  would  have  power  to  increase  their  issues,  upon 
any  reverses  of  trade,  or  convulsions  abroad,  by  which  tho 
demand  for  specie  for  exportation,  or  an  increase  of  issues 
for  domestic  circulation,  should  become  necessary. 


118  buncombe's  free  banking. 

rivalry  and  commercial  prosperity  encourage  over- 
issues of  bank  paper. 

In  times  of  prosperity,  the  love  of  gain,  and  the  power  of  increasing  their  circula- 
tion, and  consequently  their  dividends,  almost  at  will,  as  well  as  the  spirit  of 
rivalry  between  similar  banking  institutions,  frequently  induce  them  to  over- 
issue, and  consecutively  to  contract  their  issues  or  suspend  their  specie  payments. 

Banks,  exercising  the  powers  of  banks  of  issue,  and  of 
discount  and  deposite,  especially  while  under  the  influence 
of  private  interest,  are  liable  to  over  issue  in  times  of  pros- 
perity ;  and  every  over-issue  must  be  invariably  succeeded 
by  consequent  concomitant  contractions.  So  long  as  the 
paper  is  convertible,  the  confidence  that  one  bank  inspires  in 
its  neighboring  institutions,  by  liberal  issues  in  times  of 
prosperity,  is  often  conducive  to  the  over-issues  of  other 
banks.  Each  bank,  fancying  that  their  credit  and  conduct  is 
quite  equal,  if  not  superior,  to  that  of  other  institutions  do- 
ing a  similar  business ;  and  if  such  banks  are  safe  in  ma- 
king liberal  discounts,  they  think  themselves  equally  safe. 

But  a  less  pardonable  feeling  appears  too  ofcen  to  influ- 
ence incorporated  banks  in  their  issues,  that  is,  the  feeling 
of  rivalry,  jealousy,  or  ambition  (aided  by  the  love  of  gain,) 
not  to  be  out-done  by  other  institutions,  either  in  the  ex- 
tent of  their  business,  or  in  the  amount  of  their  dividends; 
nor  when  a  reverse  of  fortune  arrives,  in  their  violent  and 
rapid  contractions.  Profit,  howev^er,  is  the  ruling  passiort 
of  incorporated  companies^ 


dtjncombe's  eree  banking.  IW 

CHAPTER  XX. 

THE  ISSUE  OF  SMALL  BILLS  INCREASES  PANICS, 

The  issue  of  small  bills  operates  against  the  currency  powerfully  in  two  wltys ; 
firstly,  by  driving  out  of  thase  men's  pockets  who  lay  up  small  suras  the  specie 
that  would  otherwise  kave  remained  in  them  ;  and,  secondly,  when  a  panic  ar- 
rives, by  inducing  such  small  bill-holders  to  demnnd  the  specie  instantly  of  the 
banks,  in  exchange  for  their  bills. 

The  issue  of  small  bills  increases  the  evils  of  over- issues 
in  two  ways.  Firstly,  it  drives  the  precious  metals,  that 
would  be  found  in  circulation  among  a  class  of  people  who 
keep  a  little  change  by  them,  from  their  pockets  ;  and  from 
small  circulation.  Secondly,  the  persons  who  keep  money, 
with  a  hope  of  laying  by  small  sums  to  meet  a  payment  on 
land,  build  a  house,  purchase  stock,  or  other  necessaries, 
demand  the  specie  for  their  notes,  on  the  least  apprehen- 
sion of  a  run  upon  the  bank.  The  moment  a  suspicion  is 
raised  against  the  solvency  of  a  bank,  or  against  the  conver- 
tibility of  Its  notes,  they  exchange  theirbills  for  specie,  either 
at  the  bank,  or  at  any  other  market  where  it  can  be  made  ; 
and  thus  abstract  from  the  circulation,  at  a  moment  of  a  threat- 
ened run  upon  the  banks  for  specie,  a  part  of  the  coin  that 
ought  to  have  been  already  laid  by  them  in  times  of 
prosperity — ^thus  adding  increased  danger  from  the  threat- 
ened panic.  And  here  again  occurs  the  competition 
of  the  banks  in  their  contractions,  and  their  means  of  ob- 
taining the  "  first  haul''  upon  the  public  for  their  remittan- 
ces; while  the  hoarding  of  their  own  specie,  as  well  as  their 
drawing  upon  such  institutions  as  they  have  a  legal  right  to 
expect  specie  from,  although  out  of  the  ordinary  cour- 
teous course  of  business  formerly  existing  between  them^ 
increases  the  evils  of  the  money  pressure. 

BANK  COMPETITION.       BANK   NOTES    ACTUALLY  A  TENDER. 

**  Competition"  is  said  to  be  "  the  life  of  trade,"  but  bank  competition  reverses  the 
order  of  things,  and  by  producing  over-issues  and  over-contractions,  oppresses 
jnen  in  business,  causing  the  ruin  of  trade  and  the  overthrow  of  business. 

Hence  the  evil  of  having  many  banks,  or  the  disadvan- 


120  buncombe's  free  banking. 

tage  of  what  may  be  called  bank  competition — a  competi- 
tion once  looked  upon  as  likely  to  reduce  the  rate  of  inter- 
est, and  increase  the  facility  of  bank  loans — but  which  is 
only  found,  by  experience,  to  be  one  between  banks,  in 
their  readiness  to  issue  promises-to-pay,  and  to  inundate 
the  country  with  their  notes  in  times  of  plenty,  and,  when 
money  is  scarce,  in  their  rapid  contractions,  and  speedy 
collections ;  as  well  as  in  devising  the  safest  means  of  charg- 
ing the  people  three,  four,  five,  and  often  six  times  as  much 
for  their  credit,  when  they  have  them  once  in  their  power, 
as  the  law  allows.  In  short,  bank  competition  seldom  bene- 
fits the  public.  It  consists  in  a  strife  to  see  which  can  make 
the  largest  dividends,  and  not  forfeit  their  charters.  Such  a 
competition  is  an  evil,  and  dangerous,  both  to  the  bankers 
and  the  public ;  because  it  may  keep  in  circulation  a  large 
inflation  of  the  currency  for  some  time,  without  any  sensi- 
ble inconvenience  to  the  public,  until  that  which  should  be 
always  left  as  free  as  water,  to  flow  wherever  it  is  most  re- 
quired, having  been  dammed  up  for  a  time,  atlength  breaks 
down  all  barriers,  and  spreads  consternation  and  dismay  in 

its  course. 

The  channels  of  commerce  can  only  contain  precisely  as 

much  money-currency,  as  is  sufficient  for  all  the  mercantile 
purposes  of  life.  The  greater  the  metalic  proportion,  the 
less  remains  to  be  rapidly  put  in  motion,  producing  increas- 
ed alarm  and  confusion,  by  the  run  upon  the  banks  in  times 
of  panics,  from  thousands,  who  would  remain  quite  content- 
ed, and  even  ignorant  of  any  panic  or  danger  to  the  cur- 
rency, if  they  had  had  the  precious  metals  for  their  money, 
as  they  at  all  times  had  desired,  instead  of  doubtful  credit 
paper. 

Hence  the  great  importance  of  furnishing  each  class  of 
society  with  the  kind  of  currency  they  desire.     Give  the 


duxcombe's  free  banking.  121 

mechanic  and  laborer  his  favorite  metalic  money — the  com- 
mercial man  his  convertible  paper  of  large  denominations. 
Thus  the  currency  would  be  brought  back  to  its  original 
purity  and  convertibility.  The  spirit  of  gambling-specula- 
tion would  be  restrained ;  property  of  every  description 
be  uniformly  saleable  at  its  true  value  ;  money  be  equally 
and  regularly  plenty  as  other  commodities  ;  the  difference 
of  exchange,  between  different  parts  of  the  Union,  be  les- 
sened, if  not  wholly  removed — consequently,  the  advanced 
price  upon  imported  articles  would  be  diminished  to  tho 
consumer,  and  importations  lessened.  The  man  who  receiv- 
ed five  dollars  on  Saturday  night  in  bank  notes,  would  not 
feel,  that  by  spending  a  shilling  needlessly  he  was  making 
money,  because  he  got  seven  shillings  in  specie  in  exchange. 
The  man,  who  could  save  a  few  dollars  from  his  wages  to 
lay  by  for  some  future  purchase,  would  not  fear  to  attempt 
it,  lest  he  should  loose  the  whole  through  the  inconvertibili- 
ty of  the  paper  money  that  he  may  have  been  required  to 
receive. 

It  is  useless  to  say,  that  bank  paper  money,  as  it  is  called, 
is  never  a  lawful  tender,  and,  therefore,  no  one  is  compel- 
led to  take  it  unless  he  chooses.  For  what  business  could 
any  man  do  in  any  city  or  town  in  the  United  States,  who 
should  refuse  to  receive  in  exchange  for  his  wares,  the 
common  currency  of  the  place  ]  Or  how  long  would  a  labor- 
er expect  to  find  employment,  should  he,  when  Saturday 
night  came,  tell  his  employer  he  must  have  the  specie  for 
his  wages  ?  The  employer,  it  is  true,  could  be  compelled 
to  pay  him  in  specie  once,  but  he  probably  would  not  em- 
ploy him  any  longer.  Hence,  every  man  in  business  in 
community,  is  as  effectually  compelled  to  receive  paper 
currency  in  payment  for  debts  due  to  him,  as  he  would  be 
were    it  made  a  lawful  tender.     The  poorest  portion  of 


122  duncombe's  free  banking. 

the  currency  circulates  most  freely,  hence  the  apparent  in- 
undation of  a  country  with  the  bills  of  any  bank  of  doubt- 
ful convertibility. 

BANK    SECURITIES, 

The  unlimited  responsibility  of  the  directors  of  banks  and  the  liability  of  their 
securities,  together  with  the  separation  of  banks  of  issue  from  those  of  discount, 
will  materially  lessen  excessive  issues  and  contractions  of  the  currency,  with  all 
the  evil  consequences  that  follow  in  their  train. 

The  directors  of  a  bank  of  discount  should  give  security 
for  all  money  that  shall  pass  through  their  hands,  as  fully  as 
any  receiver  of  public  money  would  be  required  to  for  the 
monies  that  he  should  receive. 

The  bank  of  discount,  being  entirely  separated  from  that 
of  issue,  would  not  be  liable  to  act  unduly  upon  the  curren- 
cy, by  increasing  its  issues  beyond  its  proper  limits,  or  by 
restricting  them  to  the  prejudice  of  the  commercial  inter- 
ests of  the  country. 

The  bank  of  issue  should  be  free  from  commercial  influ- 
ence, and  from  a  credit  mania.  It  would  have  one,  and 
only  one,  object  in  view — to  coin  bank  paper  into  converti- 
ble currency ;  and  to  guard  against  excessive  issues,  by 
which  the  possibility  of  a  drain  of  specie  from  the  vaults 
of  the  bank  could  be  produced,  and  ruinous  contractions 
rendered  unavoidable, 

STOCK  IN  ONE  UNIFOBM  CURRENCY  PROFITABLE  AND  SALEBLE. 

The  stock  in  the  people's  free  bank  more  profitable  than  that  in  private  banking 
associations,  or  in  incorporated  companies  ;  safer  from  counterfeits — more  sale- 
able— and  the  expense  of  producing  and  conducting  it  materially  less. 

When  the  incorporated  banks,  one  after  another,  shall 
have  all  wound  up  their  concerns,  and  taken  stock  in  the 
people's  free  bank,  and  saved  nine-tenths  of  the  expense  of 
conducting  their  institutions  themselves,  and  become  con- 
vinced that  the  apparent  gain  by  excessive  expansions  of 
the  currency,  is  more  than  counter-balanced  by  the  loss  in 
the  succeeding  contractions ;  that  currency,  being  the  pro- 


buncombe's  free  banking.  123 

duct  of  the  sovereign  power  of  the  state,  ought  not,  under 
any  circumstances,  to  be  subjected  to  the  management  or 
control  of  irresponsible  interested  individuals,  who  claim  a 
limited  individual  liability  for  the  very  currency  that  they 
would  dignify  with  the  high  sounding  appellation  of  money. 
Then,  and  not  till  then,  will  be  clearly  observable  the  great 
benefits  of  having  but  one  system  of  paper-money  in  the 
United  States.  Then  this  United  States  bank  paper  would 
be  equally  current  throughout  the  Union,  and  less  liable  to  be 
counterfeited  than  individual  state  bank  notes — from  the  fact, 
that  all  the  bills  of  the  same  denomination  would  be  from 
the  same  engraved  plate,  and  be  executed  by  the  officers 
of  the  United  States  bank  ;  and  all  bills  apportioned  to  any 
one  state,  would  be  executed  by  the  officers  of  that  state 
bank;  therefore,  there  would  be  several  signatures  upon 
each  of  the  bills,  which  would  be  familiar  to  all  business 
men,  and  less  liable,  if  counterfeited,  to  pass  undetected- 
Another  benefit  would  be  found  in  the  lessened  expense  of 
producing  the  paper  for  circulation,  and  of  conducting  the 
banks  of  discount. 

A  laudable  ambition  to  accommodate  the  public,  to  secure 
popular  favor  and  re-election,  would  induce  directors  cho- 
sen by  the  people,  to  accommodate  their  customers — men 
of  business,  the  fair  traders,  and  manufacturers — ^by  dis- 
counting their  actual  business  paper,  having  but  short  pe- 
riods to  run  ;  in  preference  to  lending  money  to  foreign 
speculators  xn^on  fictitious  paper,  made  payable  in  some  dis- 
tant place — for,  although  such  loans  may  enrich  the  institu- 
tion, by  allowing  them  large  profits  on  bills  drawn  upon 
that  place  for  the  re-payment  of  the  money  when  the  dis- 
counted note  becomes  due,  yet  the  public  are  uniformly 
injured  by  the  transaction. 

The  interest  of  the   directors,  being  identical  with  the 


124  duncombb's  free  banking. 

mass  of  community  by  whom  they  are  elected,  they  will 
serve  them  as  they  would  desire  to  be  accommodated  them- 
selves, honestly  and  faithfully. 

The  dependence  of  the  banker  upon  the  public  for  his 
re-election,  would  be  a  sufficient  inducement  to  obtain  his 
attention  promptly  to  his  business  ;  and  further  than  this, 
he  ought  never  to  be  influenced  by  fear,  favor  or  reward. 
He  ought  to  move  like  the  clock,  wholly  independent  of 
the  surrounding  influences.  The  paper  currency  would 
then  become  perfectly  convertible,  and  equally  current  in 
every  part  of  the  Union,  and  released  from  the  dangerous 
tendency  to  expansions,  by  which  the  history  of  paper  mo- 
ney has  been  so  uniformily  marked  throughout  the  world, 
but  more  especially  in  the  United  States. 


CHAPTER  XXI. 
ON  OBJECTIONS  TO  FREE  BANKING. 

OF  THE  OBJECTIONS  TO  A  REPUBLICAN    CURRENCY. 

It  will  be  urged,  by  persons  interested  in  the  continuance 
of  incorporated  banking  companies,  and,  perhaps,  by  those 
who  are  alarmed  at  the  idea  of  a  change  in  the  circulating 
medium  of  the  country,  that  there  are  doubts  of  the  consti- 
tutionality of  the  measure,  and  of  its  utility  even  should  it 
be  constitutional.  To  the  first  of  these  ojections,  we  ask  to 
be  referred  to  the  particular  clause  of  the  constitution  con- 
taining the  prohibitory  article  ;  for  as  we  understand  that 
instrument,  it  is  clearly  favorable  to  the  exercise  of  the  re* 
quisite  power  by  congress  to  regulate  the  currency.  And 
here  let  me  remark,  that  the  unconstitutionality  of  the  in- 
corporation of  banking  companies,  consists  in  representa^ 


dtjncombe's  free  banking.  12$ 

tives  exercising  their  delegated  powers  for  a  longer  period 
than  the  time  for  which  they  were  elected  ;  for,  as  they 
vest  certain  powers  and  privileges  in  individuals,  these  indi- 
viduals' private  rights  prevent  the  repeal  of  the  law  by 
their  successors  in  office.  This  is  as  equally  applicable  to 
the  state  legislatures  as  to  the  congress  of  the  United  States. 
The  words  of  the  Constitution  are,  that  "  Congress  shall 
have  power  to  coin  money,  regulate  the  value  thereof,  and 
of  foreign  coin."  Hence,  may  it  not  be  inferred,  that 
whatever  alters  the  value  of  the  coin,  is  expressly  placed 
at  the  disposal  of  congress  ? 


CHAPTER  XXn. 

CHARTERED    BANKING    COMPANIES    ANTI-REPUBLICAN    AND 
DISSATISFACTORY. 

The  people  have  become  Justly  dissatisfied  with  the  present  chartered  bank  paper 
money. — They  see,  in  this  system,  principles  diametrically  opposed  to  the  Con- 
stitution, and  to  the  spirit  of  the  Declaration  of  Independence. 

To  convince  the  public  of  the  importance  of  a  republi- 
can free  banking  system  to  their  permanent  financial  and 
political  prosperity,  and  to  render  this  question  clear  to  the 
minds  of  persons,  who,  from  having  seen  the  evils  of  paper 
money,  (whether  it  be  the  United  States  "old  continental,** 
or  our  modern  incorporated  bank  paper,  with  its  twin-sister, 
sMnplastei'Sy)  have  become  firmly  established  in  a  well- 
grounded  prejudice  against  all  bank  paper,  I  would  remark, 
that  we  are  by  necessity  compelled  to  use  it,  and  should, 
therefore,  render  it  as  perfect  as  possible.  To  those  who 
are  enchanted  with  the  idea  of  banks  furnishing  the  curren- 
cy, but  who  are  in  no  way  connected  with  or  dependant 
upon  them,  I  most  cheerfully  address  myself;  while  with 


126  duncombe's  free  banking. 

those  who  oppose  the  free  banking  S3^stem  from  interested 
motives,  it  is  in  vain  to  use  arguments — for  "  convince  a  man 
against  his  will  and  he's  of  the  same  opinion  still." 

Allow  me  then  to  direct  the  attention  of  all  Americans, 
with  well  constituted  minds,  to  the  spirit  of  the  Declaration 
of  Independence  and  of  our  Constitution.  One  spirit  per- 
vades the  whole.  It  is  the  spirit  of  liberty  ;  and  of  an  equal- 
ity of  civil,  political  and  religious  rights  and  privileges. 
It  intends  the  most  good  to  the  greatest  number,  and  the  ut- 
most advancement  of  human  happiness.  This  spirit  should 
be  our  polar  star.  By  its  light  every  true  American  should 
imbue  all  the  subordinate  institutions  of  our  government, 
witli  the  same  character  and  principles,  that  more  than  half 
a  century's  experience  has  proved  so  successful  in  politics. 
The  nearer  the  spirit  of  our  currency  approaches  that  of 
our  form  of  government,  the  less  danger  have  we  to  appre- 
hend from  its  imperfections. 

No  aristocratic,  exclusive  or  monopolizing  elements  are 
found  in  the  fundamental  principles  of  our  government. 
The  sovereignty  of  the  people,  and  their  inalienable  right 
to  regulate  their  political,  financial,  religious  and  literary  in- 
stitutions, according  to  their  own  choice,  is  every  where  in- 
tended. 

The  mind  is  forcibly  struck,  on  reading  the  Declaration 
of  Independance,  with  the  "we,"  meaning  the  people  of 
these  United  States,  and  admitting  of  no  superior  pov^rer, 
save  the  Father  of  all  mercies.  The  same  spirit  breathes 
through  the  Constitution.  And  as  these  principles  govern  us, 
we  will  examine  them.  They  are  ancient  land  marks,  nev- 
er to  be  lightly  questioned  or  hastily  removed. 

As  "  governments  derive  their  just  powers  from  the  con- 
sent of  the  governed,"  so  paper,  intended  to  circulate  as 
money,  should  only  enjoy  that  privilege  from  the  consent 


Dt/NCOMBE'S  FREE  BANKING.  127 

of  those  among  whom  it  is  intended  to  circulate.     **  We 
hold  these  truths  to  be  self-evident,  that  all  men  are  created 
equal ;  that  they  are  endowed  by  their  Creator  with  cer- 
tain inalienable  rights ;  that  among  these  are  life,  liberty, 
and  the  pursuit  of  happiness."     Here    we   have,  in  these 
"  self-evident  truths,"  a  summary  of  the  objects  of  human 
action,  and  the  motives  by  which  they  are  governed.  **  The 
pursuit  of  happiness"    is   here   declared  to  be  among  the 
great  inducements  to   human  actions ;  which  it  is  the  busi- 
ness of  governments  to  provide   for.     "  To    secure   these 
rights,  governments  are  instituted  among   men,  deriving 
their  just  powers  from  the  consent  of  the  governed."  How 
clearly  have  the  framers  of  this  Declaration  been  impres- 
sed with  the  right  of  the  people  to  control  their  own  desti- 
nies ;  to  regulate  their  own  actions ;  and,  through  their  re- 
presentatives, to  pass  such  laws  as  shall  secure  to  them  the 
full  enjoyment  of  these  great  first  principles  of  human  actions. 
And  here  let  me  observe,  that  whatever  tyranny  pervades 
society — whether  it  be  political,  as  was  the    tyranny  that 
our  forefathers  complained  of  in  this  Declaration — or  reli- 
gious tyranny,  such  as  drove  our  early  Puritan  and  reli- 
gious fore-fathers  to  remove   from  a  country  where  their 
minds  and  consciences  were  enslaved,  to  free  and  indepen- 
dent America — or  financial  tyranny,  such  as  drives  the  in- 
habitants of  the  old  world  to  seek  a  refuge  in  America,  from 
the  grasp  of  the  tax-gatherer,  the  ty thing  of  the  priest,  the 
rating  for  the  poor,  and  the  impoverishing  effects  of  duties, 
imposts,  customs,  fees,and  taxes,  by  which  they  are  plunder- 
ed by  law  in  open  daylight.  Against  all  these  oppressions  in 
a  foreign  land,  we  may  inveigh  with  as  much  vehemence  as 
we  please  ;  but,  speak  against  the  tyranny  of  incorporated 
banking  companies,  and  you  have  about  your  ears  a  swarm 
of  angry  wasps  that  would  soon  sting  out  your  eyes. 


128  duncombe's  free  banking. 

But  let  us  proceed  witli  the  opinions  of  our  fore-fathers 
upon  the  use  and  end  of  governments;  and  consider 
the  manner  in  which  they  should  be  treated,  whenev- 
er they  fail  to  secure  to  the  people  the  objects  of  their  insti* 
tution.  "  That,  whenever  any  form  of  government  be- 
comes destructive  of  these  ends,  it  is  the  right  of  the  peo- 
ple to  alter  or  abolish  it,  and  to  institute  a  new  government; 
laying  its  foundation  on  such  principles,  and  organizing  its 
powers  in  such  form,  as  to  them  shall  seem  most  likely  to 
effect  their  safety  and  happiness." 

Here  let  me  ask,  if  an  entire  change  in  the  form  of  gov- 
ernment is  justifiable  in  a  nation,  where  lives  are  liable  to  be 
lost,  and  physical  force  supercedes  the  mild  codes  of  civil 
laws,  and  mercy  be  left  to  weep,  while  military  prowess  and 
power  erect  their  thrones  and  establish  their  authorities, 
how  much  more  right  have  the  people  to  change  one  of  the 
elementary  principles  of  their  constitution,  that  has  been 
found  by  experience  to  be  incompatible  with  their  pros- 
perity 1  But  let  us  not  charge  our  fore-fathers  with  having 
established  our  paper  money  currency.  Let  us  examine 
the  facts  of  the  case.  Let  us  see  what  the  early  currency 
of  these  United  States  was ;  and  enquire  Into  the  causes  of 
the  defects  of  our  present  incorporated  bank  system. 

THE  DEFECTS  OF  THE  CURRENCY  PRODUCED  BY  CHARTERED 

BANKS. 

The  evils  of  paper  circulating  as  money,  may  all  be  traced  to  the  connection  of 
currency  with  credit,  with  private  interest,  and  with  politics. 

You  may  trace  the  expansions,  contractions  and  incon- 
vertibility of  the  currency,  I  believe,  to  its  connection  with 
credit  f  with  'private  inter  est  y  or  with  ^^6'Zz*^2C5  ;  and  most  of 
the  evils  of  paper  money  generally  originates  from  one  or 
all  of  these  causes. 

It  was  not  until  after  the  failure  of  government  notes. 


dttncombe's  free  banking.  129 

(the  old  continental  money,)  that  private  companies  began 
generally  to  issue  paper  intended  to  circulate  as  money. 

The  following  is  from  the  Connecticut  Gazette,  No, 
1504,  (New  London,)  September  6,  1792 :  "  The  trade 
and  manufactures  of  this  state,  (says  a  correspondent,)  have 
long  struggled  under  the  want  of  a  capital,  proportioned  to 
the  industry  and  enterprise  of  its  citizens  ; — that  want  may 
now  be  supplied  by  means  of  the  banks  established  at  New 
London  and  Hartford.  Every  useful  occupation,  and 
every  industrious  citizen,  may  be  assisted  with  money,  as 
circumstances  may  require  and  justify  ;  but,  in  order  to 
carry  the  means  of  the  bank  into  the  fullest  effect,  their 
bills  must  circulate  among  all  ranks  of  people  freely  as  mon- 
ey :  it  behooves,  therefore,  every  well-wisher  to  the  pros^ 
perlty  of  the  community,  to  give  credit  to  the  notes  of  the 
bank.  Although  trade  may  more  immediately,  and  in  a 
more  considerable  degree  be  benefitted  by  these  Institutions, 
yet,  every  other  branch  of  business  will  come  in  for  a  pro- 
portionable share.  A  flourishing  commei-ce  dispenses  bles- 
sings to  all  within  the  sphere  of  its  operations,  and  adds  to 
the  value  of  the  landed  interests,  as  well  as  the  articles  in 
which  it  principally  deals.  The  notes  of  the  banks  will  be 
found  more  convenient  for  a  circulating  medium,  and  may 
be  kept  by  the  owners  in  greater  safety,  than  hard  money  ; 
and  none  need  be  apprehensive  of  any  deception  in  them 
as  the  promise  on  the  face  of  them  will  be  carefully  and 
punctually  fulfilled." 

The  above  shows  the  exertion  that  was  made  at  that  ear- 
ly period,  to  Induce  the  people  to  receive  this  paper — the 
notes  of  the  banks — at  New  London  and  Hartford  as  mon- 
ey ;  and  the  writer  declares  that  the  facts  on  the  face  of 
these  notes  "  will  be  carefully  and  punctually  fulfilled." 
Nothing  is  here  said  of  limited  liability,  or  of  privileges 


130  buncombe's  free  banking. 

not  enjoyed  by  other  citizens.  The  reason  assigned  for  the 
necessity  of  issuing  and  circulating  these  paper  promises, 
is  said  to  be  "  the  want  of  capital  proportioned  to  the  indus- 
try and  enterprise  of  its  citizens."  While  the  same  cause 
exists,  the  same  remedy  will  be  likely  to  be  applied.  Cred- 
it will  be  attempted  to  be  made — a  substitute  for  capital — 
whose  functions  it  cannot  long  perform. 


CHAPTER  XXIIl. 

A  REMEDY  FOR  THE  WANT  OF  CAPITAL.   BANK  NOTES  ARE 
NOT  CAPITAL. 

While  the  discounts  of  banks  are  confiued  to  actual  business  paper,  having 
but  short  periods  to  run,  and  no  iudulgcr.«ce  is  shown  by  one  bank  to  another,  ill 
not  demanding  their  balances  in  specie  from  each  other,  frequently,  and  at  stated 
periods,  excessive  expansions  of  the  currency  are  less  liable  to  occur — the  chan- 
nels of  circulation  are  less  liiil)le  to  become  surcharged — the  high  price  of  impor- 
ted articles,  and  excessive  importations,  are  less  likely  to  ensue — and  the  neces- 
sity for  the  exportation  of  specie  will  in  some  measure  be  obviated. 

We  are  now  brought  to  an  examination  of  chartered 
bank  paper,  when  used  as  a  remedy  for  the  want  of  capi- 
tal ;  and  a  wretched  substitute  for  capital  will  it  be  found  to 
be.  That  there  is  a  want  of  capital  in  the  United  States, 
proportioned  to  the  industry  and  enterpiise  of  the  inhabi- 
tants, no  one  will  doubt ;  nor  will  any  one  deny  that  bank 
notes,  while  they  were  only  issued  in  sums  proportioned  to 
the  actual  demand  for  currency,  were  convenient  and  use- 
ful;  but,  whenever  they  are  sought  and  used  as  capital, 
they  are  diverted  from  their  legitimate  channels,  and  cease 
to  be  serviceable  to  a  community.  So  much  paper  money 
then  only  may  be  circulated  as  can  continue  to  circulate 
freely  among  the  people  without  a  tendency  to  exportation^ 
The  moment  it  is  required  to  assume  the  character  of 
capital,  its  true  and  legitimate  powers  fail,  and  it  vanishes 
like  smoke, — nothing  remains  but  stained,  worn  and  soiled 
rags  of  paper. 


buncombe's  free  banking.  131 

One  continued  train  of  abuses,  impositions  and  frauds 
kave  succeeded  each  other,  from  the  very  first  incorpora- 
tion of  chartered  companies  for  banking  purposes,  to  the 
present  period.  And  we  may  here  remark,  that  any  es- 
tabhshment  of  a  government  currency,  connected  with  the 
credit  either  of  a  state  or  of  the  United  States,  would  be 
scarcely  less  objectionable  than  that  of  incorporated  com- 
panies ;  as  the  currency  of  such  bills  would  depend  upon 
the  credit  of  such  state,  or  of  the  United  States,  and  would 
be  liable  to  be  issued  according  to  the  interest  of  the  party 
in  power,  (not  less  violent  than  private  interest,)  and  still 
less  secure  than  private  paper  would  be  under  proper  lia- 
bilities. The  country  would  be  liable  to  be  inundated  with 
it  in  times  of  prosperity.  And  in  times  of  danger,  scarcity, 
and  an  extensiv^e  foreign  demand  for  specie,  the  govern- 
ment would  only  be  able  to  issue  more  bills  ;  which  would 
become  more  and  more  uncurrent,  as  it  was  found  to  be 
less  and  less  able  to  redeem  them.  And  in  the  end,  should 
a  reversion  of  trade,  from  a  foreign  war,  or  from  any  other 
cause,  continue  to  operate  against  the  state,  or  against  the 
Union,  for  any  length  of  time,  fear  would  be  likely  to  be 
entertained  that  such  money  would  become  like  the  old  con- 
tinental, a  mere  shadow  of  what  it  had  once  been — and  a 
monument  of  the  wickedness  or  folly  of  those  who  attempt- 
ed to  give  credit  paper  the  value  of  real  capital. 

Credit  is  universally  admitted  to  be  useful  to  the  promo- 
tion of  enterprise,  industry,  and  ambition.  But  credit  must 
never  be  called  capital,  nor  treated  as  capital.  And  in  this 
view  of  the  case,  we  again  call  the  attention  of  the  patient 
reader  to  the  words  of  the  Declaration  of  Indepence  re- 
specting the  abuses  of  government ;  and  leave  the  reflecting 
mind  to  compare  the  political  defection  of  a  government,  in 
whole  or  in  part,  to  the  failure  of  any  one  of  its  elementa- 
ry principles. 


132  BUNCOMBE  S  FEEE  BANKING. 

Every  person  connected  with  the  business  of  the  curren- 
cy, knows,  from  sad  experience,  the  very  imperfect  man- 
ner in  which  incorporated  banks  have  supplied  the  country 
with  a  currency  in  times  of  oppression  and  stagnation  of 
business,  during  a  foreign  demand  for  specie — while  the 
exchanges  are  greatly  against  this  country — and  when  eve- 
ry man  of  business,  however  prudent  he  may  have  appear- 
ed to  be,  or  believed  himself  to  have  been,  requires  aid,  if 
he  ever  requires  it.  What  service  are  banks  to  commer- 
cial men  at  such  times?  They  are  far  worse  than  use- 
less ;  for  the  amount  of  circulation,  which  had  been  long 
maintained  by  them,  is  at  once  restricted,  and  they  become 
the  first  to  oppress  their  customers,  and  to  c^ll  in  their  debts 
by  force  of  law,  when  other  means  are  found  Ineffectual 
and  unavailing. 


CHAPTER  XXIV. 

THE  INTEREST  OF  STOCKHOLDERS  THE  RULE  OP  ACTION  POK 
CHARTERED    BANKS. 

The  uniform  practice  of  incorporated  banking  companies  of  making  the  interest  of 
the  stockholders  their  rule  of  aetio^i,  ought  to  satisfy  the  public,  that,  while  the 
currency  of  the  country  is  entiusted  tothenjt.  or  similar  institutions,  the  effects 
will  continue  to  be  the  same  as  long  as  "  like  causes  produce  like  eifects.'* 

Such  institutions  perform  just  that  part  in  business,  and 
are  just  the  organs  of  prosperity  to  a  country,  that  they 
ought  to  be  expected  to  be^  from  their  constitution,  and  the 
laws  of  their  situation.  They  are  private  machines  for  the 
manufacture  of  princely  fortunes  for  individuals,  without 
labor,  and  without  the  ordinary  means  of  becoming  useful 
to  mankind. 

How  can  it  be  expected  of  a  company,  formed  express- 
ly for  the  purpose  of  making  money,  that  they  should  for- 
get the  business  of  their  formation,  and  take  one  thought  of 


duncombe's  free  banking.  133 

the  public  interest,  or  of  the  general  prosperity  of  the 
country.  The  great,  and,  in  fact,  the  only  object,  end,  aim 
and  business  of  an  incorporated  bank,  is,  to  make  money 
for  the  stockholders.  Large  dividends,  by  safe  discounts, 
with  now  and  then  speculative  loans  to  each  other,  are  the 
true,  the  only  desirable  business  of  incorporated  banking  com- 
panies. The  good  people  of  this  republic,  have  had  expan- 
sions of  bank  credit,  followed  by  contractions  and  suspen- 
sions, until  there  can  be  but  one  opinion  of  the  perfect  con- 
vertibility of  any  credit-currency,  for  any  long  period,  when 
it  is  based  upon  credit,  or  even  connected  with  credit  and 
private  interest,  and  dependant  upon  2)olitics  for  its  continu- 
ance and  prosperity.  That  incorporated  banks  have  failed 
to  issue  paper,  that  is  at  all  times,  and  under  all  circumstan- 
ces, perfectly  convertible,  no  one  will  for  a  moment  pretend 
to  deny ;  and,  that  their  small  notes  have  driven  the  pre- 
cious metals  out  of  the  country  or  into  their  vaults,  is  equally 
true.  They  have  ceased  to  perform  the  offices  promised 
upon  the  face  of  their  bills,  by  ceasing  to  redeem  them  in 
specie  at  sight. 

THE    PROFITS  MADE  BY  A  BANK,  ABOVE    THE    FAIR    MARKET- 
ABLE RATE  OF  INTEREST,  EXTORTION. 

If  taxation,  without  representation,  is  a  just  cause  of  complaint,  why  are  chartered 
banking  companies  indulged  in  collecting,  annuallj^  such  immense  revenues  from 
the  people,  above  the  ordinary  rate  of  interest  for  the  use  of  money  ? 

But,  by  the  quotation  from  the  Declaration  of  Indepen- 
dence, upon  the  abuse  of  power  by  the  government,  and 
the  right  of  the  people  to  alter  or  change  any  system  after 
it  has  become  oppressive,  or  has  failed  to  perform  the  du- 
ties originally  assigned  to  it  or  expected  of  it,  we  are  con- 
firmed in  our  former  opinion,  that  the  people  have  an  inhe- 
rent right  to  alter  the  currency  to  suit  their  interests  or  in-^ 
clinations. 


134  duncombe's  free  banki??©. 

The  Declaration  of  Independence  proceeds :  "  But, 
when  a  long  train  of  abuses  and  usurpations,  pursuing  in- 
variably the  same  object,  evinces  design  to  reduce  them 
under  absolute  despotism,  it  is  their  right,  it  is  their  duty,  to 
throw  off  such  government,  and  to  provide  new  grounds 
for  their  future  security."  If  taxation,  without  representa- 
tion, be  a  grievance,  may  we  not  complain  that  incorporated 
banking  companies  have  long  taxed  the  country,  (without 
the  people  being  represented  in  their  corporations,)  to  many 
millions  of  dollars,  in  the  shape  of  interest,  and  per  centa- 
ges  on  exchanges,  for  the  use  of  their  credit ;  thereby  ac- 
cumulating their  dividends  and  bonuses  *?  For  whatever 
scheme  may  be  devised,  by  which  the  currency,  or  money 
of  the  country,  can  be  made  to  cost  the  borrower  more  than 
the  interest  and  use  of  the  same  ought  to  be  worth,  is  a  tax 
of  which  he  has  a  right  to  complain.  They  also  collect  a 
tax,  by  draining  the  country  of  specie,  and  continuing  to 
issue  their  promises-to-pay  long  after  they  had  ceased  to 
pay  them  in  specie  ;  .thereby  compelling  the  business  por- 
tion of  the  community  to  pay  high  prices  for  drafts  upon 
foreign  markets,  or  a  high  premium  upon  the  purchase  of 
the  precious  metals. 

What  sweet,  delusive  language — ^^  a  premium  on  gold 
and  silver  r^  The  truth  would  sound  harsh  in  the  ears  of 
our  wealthy  bankers,  and  their  agents,  the  brokers,  to  call 
things  by  their  proper  and  appropriate  names,  and,  instead 
of  saying  **  a  premium  for  gold  and  silver  paid  here,"  say, 
"  depreciated  hanh i^aper  exchanged  here.^^ 

"When  every  bank  in  the  Union  suspends  payment,  it  is 
called  "  suspension,"  and  the  precious  metals  are  said  to 
be  at  a  "  premium."  But  if  one  or  two  banks  only  stop 
payment,  they  are  said  to  have  failed,  and  are  disgraced. 
But  crime  is  not  crime,  when  the  influence  or  power  of  the 


dttncombe's  free  banking.  135 

criminals  are  sufficient  to  prevent  their  punishment  or  dis- 
grace. 

The  extent  of  the  moral  crime  of  incorporated  banks,  by 
circulating  paper  below  par,  can  only  be  estimated,  by 
computing  the  amount  of  the  excess  of  dividends  over  the 
ordinary  rate  of  interest  made  on  all  their  circulation  ;  or 
the  profits  they  make  in  times  of  prosperity  above  the  regu- 
lar rate  of  interest  on  money  ;  and  the  interest  they  charge 
dnring  the  depreciated  state  of  the  currency,  and  the  sus- 
pension of  specie  payment  by  the  banks — at  Avhich  time 
they  ought  not  to  receive  interest  on  debts  due  to  them,  un- 
less they  pay  interest  on  their  own  notes.  This  would 
furnish  some  data  for  the  discovery  of  the  amount  of  direct 
financial  crime  that  they  are  thus  guilty  of  committing. 
This,  however,  embraces  only  a  small  part  of  the  real  mis- 
chief, wretchedness  and  woe  they  entail  upon  society. 
Their  expansions  induce  indolence,  extravagance,  and  ex- 
cesses, that  leave  those  who  have  been  involved  by  their 
imprudences,  in  wretchedness  and  want. 

In  times  of  bank  contractions,  the  honest  industry  and 
economy  of  many  an  honest  laborer  is  swallowed  up  in  one 
purchase  upon  credit,  that  he  would  not  have  made,  had  he 
known  of  the  contraction  of  the  currency  that  was  about 
to  ensue  ;  or,  as  it  is  familiarly  termed,  the  hard  times  that 
were  hurrying  on.  Thousands  are  thus  ruined,  that  a  few 
yoid  of  moral  honesty  may  become  rich. 

How  can  a  banker  justify  his  receipt  of  profits,  interest, 
and  dividends  made  upon  the  promises-to-pay  that  he  ex- 
changes with  his  fellow  man,  after  he  has  neglected  or  re- 
fused to  fiulfil  such  promises  %  Yet  we  often  see  bankers 
increase  their  dividends  during  the  times  of  the  greatest 
distress  and  panic.  Or  if  they  do  not  declare  publicly  as 
large  dividends  during  the  reverses  of  the  currency,  as  at 


136  duncombe's  free  banking. 

other  times,  yet  they  no  doubt  have  less  cause  of  complaint 
than  the  unfortunate  note-holder.  Their  secret  partner^ 
the  broker,  makes  and  receives  the  money  for  them. 
Whether  it  be  equally  divided  among  all  the  stockholders, 
or  only  enjoyed  by  those  who  are  "  initiated,^'  is  left  to 
themselves  to  settle.  It  is  quite  enough  for  me  to  know, 
that  the  money  is  lost  by  the  public.  And  so  long  as  the 
people  loose  the  money  on  account  of  the  inability,  inexpe* 
diency  or  unwillingness  of  the  directors  of  the  bank  to  main^ 
tain  the  currency  of  their  paper  at  par,  the  evil  is  the  same, 
whether  one  or  the  whole  of  the  stockholders  receive  the 
profits  of  these  fraudulent  and  dishonorable  transactions. 


CHAPTER  XXV. 


ON  MORAL    OBLIGATIONS. 


Moral  obligations  are  above  all  law ;  and  no  act  should  be  made  legal  that  is  oppo- 
sed to  the  principles  of  truth  and  justice. 

Moral  honesty  is  above  all  law.  And  the  laws  of  God, 
and  of  nature  require,  that  when  contracts  have  been  enter- 
ed into  between  men,  they  should  be  fulfilled  according  to 
their  spirit,  whether  that  spirit  be  exactly  in  accordance  to 
their  letter  or  not.  No  moral  guilt  attaches  itself  to  a  tran- 
saction, when  the  best  and  most  honest  endeavors  of  the 
parties  are  used  to  meet  the  spirit  of  their  agreements,  even 
although  their  letter  is  not  strictly  complied  with. 

EX-PRESIDENT    JACKSON^S    VETO    OF  THE  UNITED    STATES 

BANK  BILL. 

The  veto  of  the  United  States  bank  bill,  by  ex-president  Jackson,  not  predica- 
ted exclusively  upon  the  unconstitutionality  of  the  right  of  Congress  to  pass 
laws  to  regulate  the  currency;  but  upon  the  unconstitutional  right  of  Congress 
to  incorporate  a  private  banking  monopoly. 

But  to  return  to  the  right  that  congress  has  to  pass,  any 
law  respecting  the  currency.     That  congress  has  exercised 


buncombe's  free  banking.  137 

the  power,  in  the  fullest  extent,  will  not  be  denied.  That 
the  opinions  of  our  ablest  statesmen  have  sanctioned  that 
act,  and  that  the  law  was  discontinued  by  the  veto  of  presi- 
dent Jackson,  not  exclusively  upon  the  ground  of  its  un- 
constitutionality, owing  to  any  want  of  power  having  been 
vested  in  congress  by  the  constitution  for  regulating  the  cur- 
rency ;  but  because  congress  has  no  constitutional  right  to 
incorporate  banking  companies,  by  which  the  value  of  all 
the  commodities  of  the  country  would  be  liable  to  be  va- 
ried to  suit  the  interested  views  of  a  few  privileged  individ- 
uals— as  appears  by  the  president's  message  upon  that  sub- 
ject, and  the  remark  that  he  could  have  given  a  draft  of  a 
law  that  would  have  been  less  objectionable,  had  he  been 
applied  to  for  that  purpose. 

But  even  had  congress  never  incorporated  a  United 
States  banking  company,  there  is  so  little  resemblance  be- 
tween the  plan  here  recommended,  and  that  of  an  incorpo- 
ration of  a  banking  company,  that  I  maintain,  that  the  gener- 
al free  spirit  that  pervades  the  Declaration  of  Indepen- 
dence and  the  Constitution,  leaves  no  doubt  upon  the  mind 
as  to  the  intention  of  the  founders  of  our  government,  as  to 
the  restrictive  powers  that  were  intended  to  be  exercised 
by  the  general  and  several  state  governments. 


CHAPTER  XXVI. 

THE    POWERS  OF  CONGRESS. 

Congress  has  power  to  create  necessary  offices ;  and  to  authorise  the  President, 
with  the  advice  and  consent  of  the  Senate,  to  appoint  officers  to  execute  any  ne- 
cessar}'  duty  or  office;  or  congress  may,  by  law,  themselves  appoint  officers, 
whenever  such  appointments  are  deemed  necessary :  how  then  can  their  constitu- 
tional right  to  authorise  the  sovereign  people  to  appoint  (elect)  persons  of  their 
own  choice  to  perform  certain  duties  be  doubted  ? 

The    doctrine   seems  to  be  this.     The    general  govern- 
ment shall  pass  all  laws,  and  transact  all  business  relating 


1S8  duncombe's  free  banking. 

to  the  peace,  prosperity  and  good  government  of  the  Uni- 
ted States,  where  a  uniformity  of  action  and  operation 
would  better  promote  the  general  welfare  than  the  local  le- 
gislation of  the  several  states  would  be  likely  to  do  ;  and 
vice  versa. 

It  is  true,  that  congress  has  never  authorised  the  people 
to  elect  persons,  with  power  to  examine  the  state  of  the 
currency  of  the  Union ;  and  if  the  precious  metals  were  not 
found  to  be  sufficient  to  serve  as  the  medial  commodity,  to 
bank  upon  such  a  portion  of  them  as  should  be  necessary 
to  make  up  the  deficiency.  But  its  not  having  been  done, 
by  no  means  argues  that  they  have  not  the  right  to  do  it. 
Congress,  on  all  occasions,  when  deemed  expedient,  creates 
offices  and  appoints  officers  for  any  and  every  purpose, 
without  having  their  constitutional  right  to  do  so  questioned. 
How  then  can  it  be  a  greater  stretch  of  power,  for  congress 
to  authorise  the  people  to  elect  certain  officers  for  certain 
purposes,  than  it  would  be  for  them  to  make  sach  appoint- 
ments when  they  are  equally  necessary  1  and  should  they 
find  a  paper  currency  necessary,  or  desirable,  to  issue  so 
much  paper  as  they  shall  deem  necessary  to  meet  the  de- 
mand— provided  they  shall  be  able  to  obtain  a  sufficient  spe- 
cie basis  for  the  issuing  of  bills  enough  to  make  up  the  de- 
ficiency ?  For  if  the  specie  cannot  be  obtained,  there  can  be 
but  one  opinion  as  to  the  propriety  of  circulating  paper  as 
money,  based  upon  any  security,  promises-to-pay  of  mdi- 
viduals  or  of  banking  companies,  or  other  evidences  of  debt. 
Nothing  but  the  precious  metals  can  be,  with  safety,  used  as 
a  basis  for  the  issue  of  paper  to  circulate  as  money.  A  sub- 
stitute for  money  may,  for  the  sake  of  convenience,  or  for 
the  promotion  of  enterprise  and  industy,  be  made  to  circu- 
late as  money.  But  when  notes,  or  other  evidences  of  debt, 
are  used  as  a  basis  for  the  circulation  of  paper  to  pass  as 


buncombe's  free  banking.  139 

money,  it  becomes  a  substitute  for  a  substitute.  Hence  the 
too  great  uncertainty  and  too  extended  contingency  of 
promises-to-pay,  to  be  allowed  the  appellation  of  money. 

The  circumstance  of  congress  never  having  passed  such 
a  law,  is  no  evidence  that  it  has  not  the  rightful  power  to 
do  so.  Congress  has  the  expressed  right  to  pass  a  general 
bankrupt  law — which  it  has  never  yet  found  it  expedient 
to  do.  And  each  state  passes  bankrupt  laws  or  not  to  suit 
their  respective  wants. 

THE  OKGANIZATION  OF  THE  PEOPLE  BY  CONGRESS. 

Congress  has  power  to  organize  the  people  to  regulate  the  currency  of  the  couu- 
try ;  although  the}'  may  uot  have  power  to  incorporate  a  banking  company. — Giv  • 
ing  the  people  the  means  and  the  iusirumcutby  which  they  can  exercise  an  ori- 
ginal inherent  right,  is  not  giving  them  artificial  rights,  or  artificial  wants,  but  en- 
abling them  to  supply  aud  furnish  themselves  with  the  currency  they  prefer,  as 
they  arc  now  ogauized  to  supply  themselves  with  education,  or  provide  for  reli- 
gious worship. 

The  regulation  of  the  post  office  department  is,  by  the 
constitution,  left  under  the  control  of  the  general  govern- 
ment. So  is  the  right  to  coin  money,  and  regulate  the  value 
thereof.  The  plan  proposed  for  a  republican  currency,  does 
not  require  that  congress  shall  pass  any  law  disposing  of  the 
power  of  the  sovereign  people  to  one  or  more  portions  of 
them.  It  only  requires  congress  to  organize  the  people  to 
exercise  an  inherent  i-ight  upon  the  subject  of  currency,  em- 
bracing the  regulation  and  disposal  of  one  of  the  elementa- 
ry princijiles  of  the  government,  similar  to  that  of  the  liter- 
ature and  social  hal^its  of  the  people.  So  far  as  educa- 
tion is  a  political  measure  of  the  government,  the  townships 
£^re  organized,  and  the  people  empowered,  to  control  and 
regulate  their-schools  and  colleges,  and  other  means  of  ed- 
ucation, according  to  their  sovereign  will  and  pleasure. 

The  constitution  does  not  expressly  declare  with  whom 
the  power  of  regulating  the  education  of  the  people 
shall  be  placed.     The  local  legislatures  have  uniformly  left 


140  buncombe's  free  banking. 

it  with  those  most  interested,  and  best  competent  to  decide 
what  means  will  produce  the  greatest  good  to  the  greatest 
number,  at  the  least  labor  and  expense.  Hence  towns 
regulate  the  administration  of  their  common  schools, 
agreeable  to  the  general  organization  of  the  state  for  the 
support  of  common  schools.  Cities,  and  incorporated 
towns  and  villages,  are,  by  their  incorporations,  uniformily 
empowered  to  provide  for  the  education  of  the  youth  of  the 
place  ;  and  the  people  regulate  their  system  of  education  in 
these  situations  as  they  please. 

Upon  the  subject  of  religion,  the  original  draft  of  the 
constitution  was  equally  as  silent  as  it  is  upon  the  subject  of 
currency.  But  an  amendment  provides  a  negative  clause  : 
"  Congress  shall  make  no  law  respecting  an  establishment 
of  religion,  or  prohibiting  the  free  exercise  thereof  In 
all  matters  of  faith,  opinion  and  conscience,  every  man 
should  be  perfectly  free  to  follow  the  bent  of  his  own  in- 
clination, provided  it  does  not  interfere  with  the  enjoyment 
of  the  same  liberty  by  all  others.  The  voluntary  principle 
of  worship,  and  of  the  support  of  religious  instruction,  not 
only  comports  with  the  principles  and  practice  of  the  Divine 
Author  of  our  faith,  but  gloriously  tends  to  promote  equal- 
ity of  rights  and  civil  and  religious  liberty. 

The  constitution,  however,  expressly  prohibits  the  states 
from  interfering  with  the  currency,  as  fully  and  clearly  as 
it  provides  that  congress  shall  not  interfere  in  matters  of  re- 
ligion. It  provides,  that  "  no  state  shall  coin  money ;  emit 
bills  of  credit ;  or  make  any  thing  but  gold  and  silver  coin 
a  tender  in  the  payment  of  debts."  Yet,  the  states  issue 
their  bonds,  and  provide  for  the  sale  of  them  in  a  foreign 
market ;  issue  state  scrip  ;  incorporate  banking  companies, 
with  the  power  of  accumulating  all  the  specie  of  the  coun- 
try within  their  own  vaults,  and  the  means  of  augmenting 


duncombe's  free  banking.  141 

the  circulating  medium  at  their  pleasure,  and  to  contract  it 
whenever  that  will  favor  their  own  private  interests  ;  issue 
post  notes,  due  at  future  periods  ;  and  continue  their  ordi- 
nary business  of  loaning  money  and  discounting  notes,  af- 
ter they  have  suspended  specie  payment,  thereby  perfectly 
draining  the  country  of  the  precious  metals,  leaving  only 
the  credit  issues  of  the  government,  or  the  issues  of  the 
chartered  banks,  to  circulate  as  money.  The  manner  in 
which  such  states  comply  with  the  spirit  of  this  provision  of 
the  constitution,  reminds  one  of  the  conduct  of  the  com- 
mander of  an  army,  who  stipulated  with  the  besieged  .gar- 
rison, that  upon  their  surrender  not  a  drop  of  their  blood 
should  be  spilt,  but  who  kept  his  promise  to  the  ear  only — 
not  one  drop  of  blood  was  spilt,  for  he  buried  them  all 
alive. 

If  paper  money  is  not  by  statute  made  a  lawful  tender 
in  the  payment  of  debts,  it  is  not  the  less  so  defacto^  since 
it  constitutes  the  whole  currency  of  the  country.  And 
neither  legal  enactments,  nor  process  of  law,  can  compel 
the  payment  of  debts  in  a  material  that  does  not  exist ;  or 
change  the  immutable  law  of  trade,  which  compels  the  re- 
ceipt of  one  article  of  medial  commodity  where  no  other 
exists.  By  placing  the  currency  under  the  control  and 
regulation  of  the  sovereign  people,  the  latitudinous  con- 
struction of  the  constitution  will  be  rendered  unnecessary  ; 
the  states  rights  will  be  substantially  preserved  ;  the  pow- 
ers of  the  general  government  will  not  be  infringed  upon 
or  extended  ;  but  the  sovereign  people  will  be  organized, 
and  empowered  to  regulate  freely  the  circulating  medium 
according  to  their  own  interests  and  desires. 


M 


142  duncombk's  free  banking. 

on  the  powers  of  congress. 

The  general  powers  of  congress  embrace  all  subjects  that  require  to  be  the  same 
throughout  the  Uniou. — The  powers  of  the  states  are  municipal,  local  and  domes- 
tic.— Hence  the  reasonableness  of  the  general  government  authorising  the  people 
to  regulate  the  currency. 

The  general  government  are  authorised  to  exercise  such 
powers  as  operate  alike  on  the  inhabitants  of  the  whole 
United  States,  but  which  do  not  interfere  with  the  internal  or 
domestic  affairs  of  the  individual  states.  The  powers  of 
the  state  governments  are  to  sup>ervise  and  regulate  the  in- 
ternal and  domestic  concerns  of  the  citizens  of  their  own 
states  respectively.  A  state,  in  some  measure,  represents 
a  municipality  within  a  state  or  kingdom.  The  power  of 
granting  patents,  is  appointed  by  the  constitution,  to  the  gen- 
eral government ;  as  also  that  of  declaringwar,  of  making 
peace,  of  passing  a  general  bankrupt  law  ;  and,  from  the 
very  nature  of  the  subject,  the  power  of  coining  money, 
and  regulating  the  value  thereof,  and  of  foreign  coins. 

I  conclude,  therefore,  that  congress  has  power  to  author- 
ise the  people  to  elect  the  directors  of  all  the  banks ;  and  to 
give  the  directors  authority  to  prepare  and  issue  so  much 
bank  paper  as  would  be  necessary,  together  with  the  specie 
that  would  circulate  freely  as  soon  as  the  banks  shall  have 
called  in  their  small  bills,  to  furnish  a  sufficient  currency  for 
the  convenient  interchange  of  commodities. 

The  separation  of  the  banks  of  issue  from  those  of  dis- 
count, will  lessen  the  facilities  for  the  hasty  improper  tempo- 
rary expansions  of  the  currency,  to  which  our  present  char- 
tered bank  system  is  so  liable  ;  since  the  banks  of  discount 
could  not  issue  more  paper  than  was  placed  at  their  dispo- 
sal by  the  banks  of  issue,  nor  even  that  unless  they  had  in 
their  vaults  one-third  of  the  amount  in  specie.  Thus 
the  currency  would  be  guarded  against  the  rocks  upon 
which  all  former  systems  of  paper  money  have  split.     For, 


duncombk's  free  banking.  143 

whether  they  have  been  United  States'  institutions,  or  state 
incorporated  companies^  they  have  been  equally  liable  to 
the  dangers  from  over-issues  ;  and  have  uniformly  rather 
facilitated  than  retarded  the  reverses  of  trade ;  by  which 
they  have  been  driven  to  contractions  of  their  issues  and 
various  subterfuges,  to  avoid  the  payment  of  specie  for  their 
notes*  They  have  been  compelled  to  make  foreign  loans, 
issue  post  notes,  and  sometimes  to  suspend  specie  pay- 
ments, by  their  own  imprudent  over-issues.  True,  the  cred- 
it of  flourishing  states  may  exceed  that  of  a  private  incor- 
porated company  ;  yet,  when  the  price  of  state  funds  is  be- 
low par  in  a  foreign  market,  and  there  are  no  sales  of  stock 
at  home,  they  can  no  more  redeem  their  promises-to-pay  in 
specie  without  loss,  than  could  a  private  company.  The 
great  evil  still  is,  credit  is  connected  with  the  issue  of  the 
paper  intended  to  circulate  as  money  ;  and  the  directors  of 
the  discounts  are  intimately  connected  with  the  borrowers, 
and  share  with  them,  at  least  in  sympathy,  in  their  political 
feelings,  or  in  their  private  interest,  their  wants  or  their 
prospects  of  great  gain. 

IN  CURRENCY,  CHANGES  NOT    ALWAYS  REFORMS. 

Chartered  bank  paper  changeable — Causes— Its  consequences  noted. — The  reme- 
dy— Its  effects  salutary. — Bank  paper  should  be  current — convertible — uniform — 
permanent. 

State  chartered  bank  paper,  from  .its  dependance  upon 
credit y  its  connection  with  private  interest  and  reliance  upon 
politics,  must,  by  the  laws  of  its  situation,  be  continually 
changing.  Such  banks  issue  their  notes  to  circulate  as  mon- 
ey, upon  a  credit  as  well  as  a  specie  basis.  Their  credits 
consist  of  the  notes  of  other  banks.  United  States'  and 
states'  bonds,  foreign  and  domestic  exchanges,  and  various 
other  evidences  of  debt.  This  gives  the  paper  portion  of 
our  currency  a  credit  character,  and  unfits  it  for  the  meas- 


144  duncombe's  free  banking. 

ure  of  all  values.  And  bcrvv  can  we  expect  it  to  be  otlier- 
wise,  when  we  consider  the  various  circumstances  and  con- 
tingencies attending  these  credits,  by  which  their  prompt 
and  punctual  payments  are  liable  to  be  defeated. 

Again,  its  dependance  upon  the  influence  of  private  in- 
terest, leaves  it  liable  to  frequent  expansions  and  contrac- 
tions, to  suit  the  convenience  of  those  having  the  currency 
under  their  control.  But  this  is  not  all  j  its  dependance  upon 
future  legislation  for  a  continuance  of  its  business  renders 
it  liable  to  be  made  the  tool  of  party,  or  the  slave  of  the 
majority. 

These  evils  in  the  currency  cry  loudly  for  reform.  And 
until  this  is  accomplished,  we  shall  have  changes  and  fluc- 
tuations in  it  without  end.  Changes  in  bank  loans  ;  in  the 
kind  and  quantity  of  the  circulating  medium ;  in  the  price 
of  labor — of  bread  stuffs — of  merchandize — and  of  all  oth- 
er commodities.  In  short,  the  thousand  contingencies  that 
are  constantly  operating  upon  chartered  bank  paper,  must 
produce  an  almost  endless  succession  of  changes  ;  yet,  no 
regular  change  that  can  be  foreseen  or  guarded  against  by 
the  public.  For  neither  the  directors  of  banks,  nor  our 
most  able  financiers,  are  able  to  anticipate  and  avoid  them. 

The  changes  by  the  directors  in  the  operations  cf  the 
banks,  as  well  as  the  fluctuations  of  the  currency,  serve  to 
keep  the  business  of  the  country  in  confusion  and  uncer- 
tainty ;  while  those  who  are  dependant  upon  banks  for  ac- 
commodation, are  kept  in  a  state  of  constant  anxiety,  lest 
they  should  be  disappointed  by  the  bank  upon  their  next 
application  for  a  loan. 

Currency  should  be  as  unchangeable  when  composed  in 
part  of  paper  and  part  of  gold  and  silver,  as  it  would  be  if 
composed  exclusively  of  the  precious  metals. 

To  render  the  paper  portion  of  the  currency  a  perfect 


buncombe's  free  banking.        146 

representative  of  gold  and  silver,  it  must  be  separated  from 
the  fluctuations  of  trade,  the  speculations  of  individuals, 
and  a  dependance  upon  future  legislation. 

Give  us  a  thorough  and  permanent  bank  reform.  As- 
similate the  paper  portion  of  the  currency  as  nearly  as  pos- 
sible to  specie  ;  secure  the  bill-holder  against  the  deprecia- 
tion of  the  notes,  and  the  public  against  over-expansions  and 
consecutive  ruinous  contractions,  and  you  will  thus  lay  the 
foundation  for  universal  prospenty  in  the  United  States. 


CHAPTER  XXVIL 

MORAL  PRINCIPLE  ABOVE  ALL  LAW. 

Moral  honor  above  all  law. — The  passage  of  depreciated  paper  at  par,  a  departure 
from  moral  rectitude — The  fluctuations  of  the  currency  fosters  a  g:ambling  pro- 
pensity— A  radical  reform  iu  the  currency  necessary. — The  founders  of  our  gov- 
ernment had  their  attention  directed  more  forcibly  to  politics  and  religion, 
than  to  currency. — Render  currency  republican,  and  it  will  become  the  key-stone 
of  the  arch  of  the  republican  edifice,  of  which  it  is  at  present  but  a  defective  and 
dangerous  anti-republican  corner. 

This  gambling  propensity  may  be  eaid  to  be  the  first  str^p 
towards  moral  depravity.  Men  seldom  commence  the 
most  abandoned  course  of  conduct  at  their  full  speed.  They 
are  generally  led  on  from  step  to  step.  And  ultimately 
loosing  all  regard  for  moral  obligations,  acknowledge  no 
bounds  to  their  ambition,  except  the  words  of  the  statute. 
With  them,  if  it  is  lawful  and  defensible  in  a  court  of  justice, 
it  is  right ;  and  consequently  justifiable.  A  liability  to  pay 
whatever  we  contract  to  pay,  whether  the  law  compels  us 
to  do  it  or  not,  is  the  result  of  natural  obligation.  It  ari- 
ses from  the  operation  of  the  moral  law ;  it  results  from  the 
very  nature  of  man  as  a  moral  agent.  Being  legally  re- 
leased from  an  obligation,  morally  binding,  does  not  lessen 
the  moral  obligation.     But  doing  away  with  the  legal  obli- 


146  buncombe's  free  banking. 

gation,  ought  rather  to  strengthen  the  moral  obHgation  ; 
since  the  creditor,  whose  claim  is  morally  the  same  as  be- 
fore the  legal  discharge  of  the  debtor,  has  only  the  moral 
obligation  to  rely  upon.  Faith,  honor  and  honesty,  among 
men,  do  not  depend  upon  legal  obligation ;  but  upon  moral 
honesty,  binding  mankind  to  rectitude  of  conduct.  There- 
fore, whatever  tends  to  lessen  respect  for  moral  obligation, 
should  be  avoided  as  dangerous  to  society. 

The  man  who  circulates  counterfeit  money,  is  punished 
by  law  as  a  felon,  and  an  enemy  to  society ;  and  the  man  who 
passes  bills  of  a  broken  bank,  is  treated  with  not  much  less 
severity.  But  he  who  issues  bills  that  are  five  or  twenty 
per  cent,  below  par,  is  a  gentleman  banker — complained  of 
a  little  by  those  who  suffer  at  the  moment  of  their  loosing,  to 
be  sure, — but^  he  is  a  wealthy  banker  or  broker,  and  he  is  ta- 
ken by  the  hand,  and,  wherever  he  goes,  he  is  quite  the  gen- 
tleman. He  has  made  money  out  of  the  public,  and  no  en- 
quiry is  made  respecting  his  moral  honesty. 

Oh !  the  depravity  of  the  times  !  when  men  may  defraud 
each  other  openly,  and  smile  and  be  smiled  upon  in  turn. 
When  will  the  American  people  see  the  dangerous  rock,  of 
want  of  moral  honesty,  that  is  certain  destruction  to  every 
individual  who  is  wrecked  upon  it! — and  it  is  not  less  so  to 
states  than  individuals. 

The  want  of  moral  principle  leads  to  wretchedness  of 
character  and  conduct ;  from  which,  without  reform,  the 
chances  are,  that  little  good  will  ever  arise  cither  to  individ- 
uals or  to  states.  Strict  integrity  and  punctuality  in  deal- 
ings ;  truth  and  honor  in  words  and  actions  ;  industry  and 
economy  in  habits ;  generosity  and  philanthropy  in  manners; 
alwavs  respecting  the  property,  the  feelings,  and  the  opin- 
ions of  others,  comprise  some  of  the  important  duties  of  so- 
ciety that  we  respect  and  commend.     And  how-  is  it  sur- 


buncombe's  free  banking.  147 

prising  that  we  should  be  dissatisfied  with  having  our  pock- 
ets picked  in  the  dark,  by  the  man  who  exchanges  our  com- 
modities— by  him  who  professes  to  give  us  money,  but  only 
gives  us  depreciated  paper — and  in  finding  that  every  man 
in  the  neighborhood  has  been  so  often  defrauded  in  the  cur- 
rency that  they  have  been  required  to  receive  for  debts  in 
change  for  large  bills,  or  other  ways,  that  they  feel  them- 
selves justified  in  passing  uncurrent  money  upon  every  body 
that  will  receive  it. 

This  is  evident,  from  the  uniform  habit  that  pervades 
community  of  passing  the  most  depreciated  money  first ; 
for,  whatever  is  to  be  bought,  or  for  every  payment 
that  is  to  be  made  in  money,  the  poorest  kind  must 
first  be  passed.  This  evinces  a  laxity  of  morals,  and  a  want 
of  strict  punctuality  and  moral  rectitude  at  which  every  lov- 
er of  liberty  should  shudder — for  liberty  can  only  live  while 
supported  by  virtue  and  morality — and  every  relaxation  in 
the  morals  of  the  community,  is  one  step  from  the  straight 
path  of  republican  simplicity,  honor  and  liberty. 

Strict  moral  obligation  requires,  that  the  spirit  of  every 
engagement  should  be  punctually  and  faithfuly  fulfiled  and 
complied  with.  The  passage  of  uncurrent  money,  for  a 
full  and  valid  consideration,  is  as  substantial  a  departure 
from  strict  moral  honesty,  as  the  passage  of  base  coin, 
forged  notes,  or  notes  of  broken  banks.  Yet,  such  is  the 
laxity  of  American  morals  upon  the  subject  of  currency, 
that  few  men  now  think  it  a  crime,  to  pass  money,  that  is 
but  a  slight  shade  below  par,  for  its  nominal  value ;  and 
hundreds  are  daily  found  in  the  market,  offering  their  un- 
current money  in  payment  of  small  articles,  in  the.  hope  of 
getting  specie  change  ;  believing  that  ninety  cents  in  change, 
is  as  good  to  them  as  a  paper  dollar.  True,  this  is  but  the 
exchange  of  one  commodity  for  another ;  and  were  the  un- 


148  duncombe's  free  banking. 

current  money  only  passed  to  those  who  know  its  exact 
value,  and  who  did  not  intend  to  pass  it  again  to  any  body 
who  would  receive  it  through  ignorance  of  its  real  uncur- 
reney,  or  who  would  take  it  with  the  hope  of  passing  it 
again  upon  some  unwarily  traveller  or  country  dealer,  the 
crime  would  be  far  less ;  yet  the  principle  and  its  effects  up- 
on the  morals  of  society  are  the  same. 

A  country  in  debt  is  never  free  and  independent.  There 
was  never  a  truer  remark  than,  that  "  the  borrower  is  a 
slave  to  the  lender."  And  as  true  as  this  is  with  regard  to 
individuals,  so  true  is  it  with  regard  to  states  and  nations. 
When  morality  is  lost  to  either,  all  is  lost.  Thus,  when  na- 
tions, or  tlie  commercial  individuals  of  a  nation,  are  in  debt, 
the  whole  community  are  in  debt. 

A  new  order  of  things  has  silently  crept  over  society. 
Men  are  attempting  to  live  by  their  wits,  by  contracting 
debts  that  they  cannot  pay — the  fashionable  term  of  sus- 
pending payment,  is  following  the  payment  in  uncurrent 
money.  These,  and  an  entire  disregard  to  moral  honesty, 
are  links  of  the  same  chain ;  like  the  stealing  firstly  one  pin, 
and  ultimately  coming  to  the  halter.  So  the  passage  of  un- 
current money  lays  the  foundation  to  a  depravity  of  morals, 
that  would  allow  a  man  to  contract  a  debt  that  he  could  not 
pay,  and  live  luxuriously  upon  credit,  without  earning  the 
salt  to  his  porridge. 

I  know  my  homely  style  and  my  plain  metaphors  will 
leave  me  subject  to  the  severest  criticisms.  And  I  know, 
too,  that  few  critics  are  severer  than  those  who  find  their 
craft  in  danger.  I  know  that  if  any  benefit  is  to  be  derived 
by  the  public  from  my  remarks,  it  will  be  just  so  much  out 
of  the  pockets  of  the  money  sharks  ;  and  that  just  in  that 
proportion  I  have  to  expect  to  receive  their  unlimited  casti- 
gation.     But  how  little  will  that  be  felt  by  me,  if  the  cur- 


duncombf/s  i'ree  bankixg.  149 

I'ency  should  assume  its  proper  place  among  the  elementary 
principles  of  the  government,  and  become  one  of  the  strong- 
est props  to  the  republican  edifice.  What  moral  educa- 
tion is  to  the  politics  of  a  republican  people,  strict  converti- 
bility and  punctuality  is  to  finance  and  currency.  Without 
the  first,  a  republic  could  not  long  continue  :  without  the 
last,  a  commercial  country  could  notlong  flourish  and  prosper. 

If,  after  all  that  has  been  said  of  the  advantages  of  reform, 
and  disadvantages  of  any  change  not  producing  a  radical 
reform,  there  should  be  those  so  sceptical  as  to  refuse  their 
assent  to  the  proposed  plan  upon  the  ground  of  its  being  an 
experiment,  or  of  its  being  an  innovation  of  long  established 
usages  and  customs  in  business  ;  to  them  let  me  remark, 
that,  on  this  continent  the  great  experiment  was  made  by 
civilized  man  of  the  attempt  to  construct  society  upon  a 
new  basis ;  that  it  was  here  for  the  first  time  that  theories, 
hitherto  unknown,  or  deemed  impracticable,  have  produced 
a  grand  spectacle  for  the  admiration  of  the  world — unknown 
in  the  history  of  the  past,  and  unequalled  in  its  beneficial  re- 
sults to  mankind — surpassing  the  expectations,  or  even  the 
hopes,  of  its  warmest  and  most  enthusiastic  admirers  and 
supporters. 

If  then,  after  more  than  half  a  century,  some  parts  of  this 
great  fabric,  or  some  circumstances  connected  with  it,9hould 
be  found  not  perfectly  similar  to  the  whole  edifice — if,  in 
an  entirely  new  system  of  government,  in  which  the  action, 
practice  and  experience  of  all  former  governments  have 
been  invested,  there  should  be  found  some  relicts  of  former 
institutions  incompatible  with  the  harmony,  beauty  and 
strength  of  this  splendid  living  temple — would  not  this  be 
the  place  to  examine  into  the  causes  of  any  and  every  dis- 
crepancy that  are  found  by  experience  to  exist,  and  that 
time,  habit  and  usage  have  not  been    able  to  adapt  to  the 


150  DU^'coMBE's  free  banking. 

place  originally  designed  for  it  to  occupy.  In  short,  if,  while 
the  whole  attention  of  our  fore-fathers  have  been  directed 
to  the  establishment  of  a  government  freed  from  the  evils  of 
a  monarchy,  they  have  lost  sight  of  the  currency  of  the 
country  in  the  general  and  highly  important  character  of  the 
first  principles  of  a  republican  government,  is  that  at  all  sur- 
prising. They  secured  themselves  against  the  evils  that 
had  most  vexed  and  perplexed  them.  The  church  they 
precluded  from  any  connection  with  the  state.  Literature 
they  left  free  and  unrestricted  by  any  religious  creeds  and 
sectarian  requirements.  And  they  happily  secured  to  all, 
equality  in  civil  and  religious  matters,  as  well  as  in  political 
honors  and  offices. 

But  currency  being  a  vexed  question,  and  one  respecting 
which  very  little  had  been  said  and  done,  and  one  from 
which  little  danger  was  at  that  time  apprehended,  attracted 
but  slight  notice.  The  Constitution  briefly  says  all,  ihat, 
under  the  then  existing  state  of  commerce  and  of  society, 
could  have  appeared  necessary  :  "  That  congress  shall  have 
power  to  coin  money,  and  regulate  the  value  thereof,  and  of 
foreign  coin," — evidently  not  anticipating  any  monopoly  in 
the  currrency — but  that  the  precious  metals  alone  should 
constitute  the  legal  money  of  the  country  ;  and  that  con- 
gress should,  at  any  future  period,  make  such  further  pro- 
visions respecting  the  completion  of  the  currency  as  time 
and  experience  should  dictate. 

The  defects  of  the  present  paper  money  currency  are 
now  universally  admitted,  and  the  necessity  of  some  reform 
loudly  proclaimed.  Then,  is  not  a  time  of  peace,  a  time  of 
plenty,  a  time  of  quiet  respecting  any  great  political  move- 
ment, ai^d  a  time  when  the  importance  of  the  currency  is 
becoming  known,  and  when  intemperance  and  licentious- 
ness are  giving  place  to  temperance,  order,  decency,  andre- 


duncombe's  free  banking.  151 

spect  for  sacred  and  divine  things — is  not  this  time  the 
proper  time  for  the  public  consideration  of  the  subject  of 
currency,  with  a  view  to  its  permanent  improvement  ? 

In  making  any  great  alteration  or  improvement  in  the 
system  of  paper  money,  reference  ought  to  be  had  constant- 
ly to  the  great  leading  principles  contained  in  the  Declara- 
tion of  Independence  and  in  the  Constitution,  that  the  fun- 
damental principles  of  the  government  should  all  be  made 
to  coincide,  and  that  the  ancient  land-marks  of  the  govern- 
ment should  not  be  thoughtlessly  thrown  down  or  removed, 
but  that  every  addition  should  perfect  the  glorious  plan  of 
human  liberty  and  of  human  happiness. 

America,  by  giving  money  its  proper  value,  and  render- 
ing the  currency  sound,  stable,  and  always  perfectly  con- 
vertible into  specie,  would  hold  out  inducements  to  the 
wealthy  foreigner  to  visit  our  shores,  as  well  as  to  him  who 
has  but  his  labor  to  depend  upon  for  his  sustenance. 


CHAPTER  XXVIII. 

PERIODICAL    BANK   STATEMENTS. 

The  defects  of  bank  reports — Their  mystification.— The  necessity  of  full  state- 
ments— To  this  end  a  centralized  government  necessary. — The  proposed  plan. 

Every  person,  who  has  carefully  examined  the  bank 
statements  annually  made  to  the  Secretary  of  the  Treasury 
of  the  United  States,  or  the  statements  of  banks  of  almost 
any  states  in  the  Union  as  made  to  their  legislatures, 
must  be  forcibly  struck  with  the  very  imperfect  manner  in 
which  many  of  these  statements  are  made  out — the  absolute 
ignorance,  shire  neglect,  or  wilful  misrepresentations  and 
misstatements  they  contain. 


l^g        duncombe's  free  banking. 

In  some  of  these  statements  there  appears  to  be  a  studied 
mystification  of  the  required  facts,  as  if  they  were  made 
exclusively  to  comply  with  a  clause  in  their  charters,  but 
with  the  evident  determination  of  defeating  the  intention 
the  legislature  had  in  view  in  inserting  the  clause.  There 
could  be  no  need  of  such  subterfuges  and  concealments,  il' 
the  banks  intended  to  deal  honestly,  frankly,  fairly  and 
openly  with  the  public. 

Every  facility  should  be  aiforded  the  public  for  obtaining 
all  the  necessary  information,  to  enable  them  to  compre- 
hend the  subject  of  currency  and  banking.  Every  expla- 
nation should  be  given  that  could  be  reasonably  required  to 
make  the  statements  of  the  banks  clear  to  the  most  common 
understanding.  BuJ;,  as  if  concealment  was  the  object  of 
some  of  these  bank  statements,  they  contain  imperfect,  het- 
erogenous and  fraudulent  statements  ;  by  which,  those  banks 
that  make  such  mystified  statements,  must  succeed  in  eva- 
ding the  searching  inquisitiveness  of  a  vigilant  committee, 
to  whom  they  are  referred,  if  the  committee  have  not  time 
to  ask  the  officers  of  the  banks  for  explanations,  or  to  un- 
ravel their  mysteries  in  committee. 

This,  however,  is  not  very  surprising,  when  we  consider 
that  there  are  now  in  the  United  States  nine  hundred  banks 
and  branches,  created  by  some  thirty  independent  states 
and  territories,  including  the  District  of  Columbia,  without 
any  uniformity  in  the  government  of  the  currency  except 
the  natural  law  of  private  interest,  by  which  all  chartered 
companies  are  governed. 

These  nine  hundred  credit  aristocracies  may  have  some 
important  principles  that  are  common  to  them  all ;  yet, 
having  no  common  head,  no  centralization  of  government, 
by  which  their  accounts  and  statements  could  be  directed  to 
be  made  similar,  and  no  blanks  prepared  expressly  for  their 


imiF'^^mmff^mmmm 


DUNCOMBE^S  FRES  BANKING.  153 

use,  whatever  ignorance  they  may  be  guilty  of,  they  may 
reasonably  plead  that  want  in  justification  of  their  errors. 

In  the  proposed  plan,  the  monthly  published  statements 
of  every  bank  of  discount  throughout  the  Union,  as  well  as 
the  quarterly  published  statements  of  the  banks  of  issue, 
including  the  statements  of  the  banks  of  discount,  are  con- 
sidered important ;  as  thereby  the  public  may  be  appraised 
of  the  expansions  of  the  currency,  and  in  some  measure 
enabled  to  guard  against  the  commonly  ruinous  effects  of 
over-expansions  and  consecutive  contractions. 

These  periodical  statements  should  be  made  so  clear  and 
plain,  as  to  be  as  easily  comprehended  by  every  man  who 
can  read  them,  as  any  common  statement  of  a  merchant's 
account. 

The  quarterly  bank  statements,  in  addition  to  their  ordi- 
nary matter,  should  contain  all  their  liabilities  and  assets — 
particularizing  not  only  the  debts  and  resources  of  the 
banks  ;  but  the  immediate  liabilities  of  the  banks  should  be 
distinguished  from  their  deferred  liabities ;  and  their  imme- 
diate  resources  from  their  deferred  resources.  The  amount 
of  specie  received  in  deposite  should  be  distinguished  from 
the  amount  of  bills  of  other  banks,  and  from  deposites  made 
of  their  own  notes.  Without  such  statements  it  must  be 
impossible  for  the  public  to  arrive  at  any  thing  like  a  correct 
knowledge  of  the  true  condition  of  the  currency  ;  or  that 
the  people,  for  whose  benefit  these  statements  are  made, 
should  be  able  to  judge  of  the  amount  of  paper  money  at 
any  one  time  in  circulation ;  or  the  amount  necessary,  to- 
together  with  the  specie  that  the  absence  of  smallbills  will 
always  keep  in  circulation,  to  promote  and  obtain  the  great- 
est possible  permanent  prosperity  of  the  country. 

And,  in  addition,  the  quarterly  statements  of  the  banks  of 
issue  should  contain  accounts  of  the  prices  of  money  in  for- 

N 


154  buncombe's  free  banking. 

6ign  countries  ;  and  the  rates  of  exchanges  between  the  U. 
States  and  the  countries  with  which  the  American  commerce 
is  carried  on';  and,  when  any  cause,  out  of  the  course  of  the 
ordinary  supply  and  demand,  varies  the  rate  of  exchange 
temporarily  above  or  below  what  it  ought  to  be  quoted,  that 
cause  should  be  stated  and  explained,  as  well  as  its  prob- 
able effects  upon  the  demand  and  supply  in  the  United 
States. 

By  no  means  the  least  important  of  the  measures,  propo- 
sed for  rendering  the  currency  perfectly  convertible,  and 
uniformly  current  throughout  the  United  States,  in  the  ac- 
companying plan,  is  the  contemplated  regularly  published, 
clear  and  correct  statements  of  all  the  banks,  both  of  issue 
and  discount. 

When  we  consider  the  importance  which  the  banking 
system  of  the  United  States  must  exercise  over  the  proper- 
ty and  industry,  and  consequently  the  prosperity  of  the 
country,  we  cannot  refrain  from  urging  upon  the  public  the 
importance  of  free  banking.  By  this  plan  the  people  will 
be  required  to  express  an  opinion,  through  the  ballot-boxes, 
upon  the  measures  and  policy  of  the  banks  of  discount  in 
their  immediate  vicinity,  and  of  the  states  and  United  States 
institutions  at  stated  periods.  Hence,  the  importance  of 
publishing  clear,  particular  and  correct  statements  of  all  the 
business  of  all  the  banks.  A  uniformity  in  these  state- 
ments, could  be  provided  for  in  the  same  manner  as  are  the 
returns  of  the  post  office,  by  furnishing  the  banks  with  simi- 
lar blanks,  requiring  only  to  be  correctly  filled  up  to  make 
complete  returns  from  the  banks  of  discount  to  their  state 
banks  of  issue,  and  by  them  to  the  United  States  bank  of 
issue,  for  publication,  for  the  information  of  the  public. 

The  removal  of  private  interest  in  the  concealments  of 
the  returns  of  the  banks,  will   lessen    the  temptatior  to 


duncohtbe's  free  banking.  T55 

fraud  and  false  statements ;  and  the  supervision  of  the 
state  directors  will  be  likely  to  detect  any  inaccuracies  that 
may  inadvertantly  creep  into  their  statements. 

A  bank  should  not  interfere  with  exchanges,  either  for- 
eign or  domestic.  In  fact,  there  would  be  no  domestic  ex- 
changes ;  or,  at  most,  none  above  the  actual  expense  of  the 
transportation  of  specie  from  one  part  of  the  country  to  an- 
other. This  system  would  soon  reduce  our  imports  to  the 
par  exchange  of  our  exports  ;  domestic  exchanges  would 
soon  find  their  level,  by  the  reduction  of  the  imports  of  the 
place  to  its  exports,  until  trade  would  be  equalized  through- 
out the  Union. 

The  tariff  might  then  be  confined  to  the  encouragement 
and  protection  of  domestic  manufactures.  In  all  other  re- 
spects the  trade  would  be  free  with  all  the  world,  as  is  the 
trade  between  the  different  states  of  the  Union, 


CHAPTER  XXIX. 

ON  EXCHANGES  AND  BANK  MONOPOLy. 

History  of  the  incorporation  of  banking  companies. — Expansions  and  contractions 
of  the  currency,  the  natural  effects  of  the  laws  of  their  situation. — The  high 
price  of  domestic  exchanges— of  foreign  exchanges — the  result  of  bank  monopo- 
ly.— Speculators  monopolize  the  currency,  the  trade,  and  regulate  the  price  of 
commodities. — High  prices  increase  importations. — Specie  not  returned  for  the 
sale  of  bills  in  a  foreign  market. — Eastern  speculators  increase  western  importa- 
tions.— Exchanges  between  two  places  the  barometer  of  trade.— Bank  contrac- 
tions reduce  prices  as  much  below  par,  as  their  previous  expansions  had  advan- 
ced them. — Effects  of  bank  monopoly  on  exchanges. 

Capitalists  apply  to  congress,  or  to  state  legislatures,  for 
the  passage  of  an  act  of  incorporation  for  banking  purpo- 
ses. The  law  is  passed — the  stock  is  taken — the  money  is 
paid,  and  business  commenced.  Bank  notes  are  prepared 
for  circulation.  The  newspapers  of  the  place  give  them  a 
puff  or  two  ;  the  community  read  the  puffs,  and  exaggerate 
in  their  neighborly    news  the  benefits  of  the  new  bank. 


156  DUNCOMBE  S  FREE  BANKtWG. 

Their  note  exchange  is  opened  :  the  villagers  or  citizens 
present  their  notes,  well  endorsed  by  each  other,  for  ex- 
change ;  the  board  examine  into  the  stability  of  each 
endorser,  and  register,  for  future  use,  their  abilities  and  re- 
sponsibilities. Notes  are  exchanged :  the  bankers  give  their 
unendorsed  notes,  with  limited  liability  without  interest? 
due  on  demand,  for  the  borrower's  note,  due  sixty  days 
hence,  (the  interest  for  sixty-three  days  having  been  deduc- 
ted and  retained  by  the  bankers,)  with  two  good  endorsers — 
all  three  of  them  being  liable  for  the  whole  amount  of  the 
endorsed  note  to  the  extent  of  their  entire  fortunes.  And 
this  is  the  equality  of  incorporated  banking  companies  ! 

Bankers  may  reasonably  ask,  what  right  have  the  public 
to  expect  us  to  hire  a  banking  house,  employ  clerks,  incur 
the  expense  of  obtaining  bills,  and  the  trouble,  risk  and  re- 
sponsibility of  conducting  a  bank,  merely  for  their  conve- 
nience and  accommodation  %  The  answer  must  be,  certain- 
ly, none  :  nor  do  the  directors  of  the  bank  feel  they  have 
been  elected  by  the  stockholders  for  any  such  purpose. 
The  bankers  have  sought  and  obtained  the  privilege  of  ex- 
changing notes  with  their  neighbors,  or  whoever  may  be 
disposed  to  exchange  notes  with  them,  for  the  purpose  of 
pursuing  the  trade  of  banking  as  being  the  most  profitable 
business,  and  the  best  mode  of  investing  their  capital  that 
offers.  The  directors  and  stockholders  do  not  fancy  that 
the  public  have  any  more  right  to  claim  their  services,  un- 
less it  be  to  the  interest  of  the  bank  to  accommodate  them^ 
than  they  have  to  claim  the  services  of  the  merchant  who 
sells  them  broadcloths. 

The  object  of  the  merchant  in  investing  his  money  in  broad- 
cloths, is  not  the  accommodation  of  particular  persons, 
in  a  particular  place,  but  the  investing  his  money  in  stock 
that  would  be  the  most   productive.     He  offers  his  broad- 


buncombe's  free  banking.  157 

cloth  for  sale,  at  just  as  great  an  advance  upon  the  cost  and 
charges,  as  he  believes  the  people  can  be  made  to  pay. 
Hence  it  is  clear,  that  the  accommodation  of  the  inhabitants 
of  the  place,  by  the  merchant,  any  farther  than  promotes 
his  interest,  is  no  pait  of  his  object.  His  business  is  to 
make  money  by  selling  his  goods  in  the  best  market.  He 
receives  nothing  but  current  money  in  payment  for  his 
goods,  provided  he  can  sell  them  for  that.  He  is  not  actua- 
ted by  sympathy  for  the  poor  half-  clad  inhabitants  of  the 
place,  only  so  far  as  they  have  the  means  of  paying  him  for 
his  goods.  This  is  precisely  the  situation  of  banking  capi- 
talists. They  firstly  obtain  the  exclusive  privilege  of  bank- 
ing ;  then  invest  their  capital  in  bank  stock ;  issue  their  bills ; 
discount  the  best  notes  that  are  offered,  and  charge  the  high- 
est interest  the  law^  allows  ;  for  the  laws  of  their  situation 
compel  them  to  make  as  much  money  as  they  legally  can. 
In  locating  their  banks,  they  do  not  seek  the  poorest  places, 
for  the  benefit  of  the  poorest  people,  within  their  knowl- 
edge, nor  do  they  select  the  notes  of  the  most  needy  in- 
habitants of  the  place  for  discount :  but  they  locate  their 
banks  where  the  people  are  able  to  pay  them  a  handsome 
profit  for  the  use  of  their  credit,  and  they  loan  their  money 
to  persons,  who,  with  their  sureties,  they  deem  quite  compe- 
tent to  repay  them  the  principal  in  due  time — the  interest 
they  secure  in  advance.  All  this,  too,  is  in  strict  accor- 
dance with  the  laws  of  their  situation. 

The  directors  of  banks  are  selected  by  the  stockholders 
from  their  supposed  superior  skill  in  banking,  and  their  abili- 
ty for  making  the  most  profit  upon  their  capital  stock  inves- 
ted, that  can  be  made.  They,  therefore,  sell  their  notes  to 
those  who  are  able  and  willing  to  pay  the  most  for  them, 
upon  precisely  the  same  principles  that  the  merchant  sells 
nis  broadcloth.     They  both  accommodate  their  customers, 

N* 


158  buncombe's  free  banking. 

for  their  respective  interests  only,  not  for  the  interests  of 
their  customers. 

If  the  merchant,  who  asks  five  dollars  a  yard  for  his 
broadcloth,  finds  a  customer  who  will  pay  him  that  amount 
for  all  his  stock,  he  sells  it  all  to  him  at  once  ;  and  if  he  will 
pay  him  that  sum  in  a  draft  upon  some  well  known  house  at 
par,  where  the  bill  will  be  worth  to  him  five  per  cent,  above 
par,  who  complains  of  the  merchant  for  selling  his  stock  to 
this  purchaser,  in  preference  to  selling  it  out  to  his  credit 
customers,  who,  perhaps,  already  owe  him  as  much  as  they 
are  able  promptly  to  pay  ]  But  when  bankers  loan  to 
speculators  all  the  money  of  the  place,  because  the  specu- 
lators will  repay  the  bank  in  a  distant  market,  where  a  draft 
will  be  worth  five  or  ten  per  cent,  above  par,  the  former 
customers  of  the  bank  complain,  as  though  they  had  a  right 
to  command  the  loans  of  the  bank;  yet  all  this  is  strictly 
in  obedience  with  the  laws  of  their  situation,  which  compel 
the  bankers,  as  well  as  the  merchants,  to  make  their  capital 
stock  produce  as  much  profit  as  they  legally  can. 

The  merchant  imports  and  sells  as  much  broadcloth  as 
he  profitably  can ;  firstly,  for  money,  then  for  credit,  as 
long  as  he  believes  his  sales  will  be  profitable  to  himself. 

So  the  banker  issues  and  loans  as  much  of  his  credit  pa- 
per as  he  can  keep  afloat,  and  get  pay  for,  to  the  uttermost 
limits  of  his  credit,  and  the  bounds  set  by  his  charter.  Sub- 
stituting, for  the  specie  that  should  be  in  his  vaults,  every 
evidence  of  debt  in  his  possession,  including  the  notes  of 
banks  and  public  and  private  bonds  and  securities,  and  upon 
these  credits  he  issues  bills,  intended  to  circulate  as  money, 
without  the  specie  necessary  to  meet  the  prompt  redemp- 
tion of  his  notes,  if  that  should  be  demanded. 

The  channels  of  currency  become  surcharged.  The  ex- 
portatio^  of  the  commodity  that  exceeds  the  actual  demand 


DUNCOMBE  S  FREE  BANKING.  159 

follows.  The  only  exportable  portion  of  the  currency  is 
the  precious  metals ;  consequently  that  will  be  exported. 
Brokers  become  the  convenient  agents  of  the  banks.  Spe- 
cie is  sold  at  a  premium.  The  banks  lessen  their  discounts, 
call  in  their  debts,  and  thus  contract  the  circulating-  medium 
at  their  will.  And  all  this,  too,  is  in  exact  accordance  with 
the  laws  of  their  situation  ;  and  the  immutable  laws  of  sup- 
ply and  demand. 

In  this  state  of  the  currency,  the  bank  makes  its  princi- 
pal business  dealing  in  exchanges,  as  this  affords  larger  prof- 
its than  loaning  money  at  six  per  cent.,  since  the  scarci- 
ty of  money  that  the  bank  hsis  itself  produced,  has  raised 
its  value  to  two,  three,  four,  or  perhaps  five  times  the  law- 
ful rate  of  interest.  Here  again  the  evil  effects  of  the 
monopoly  of  the  present  chartered  bank  system  of  curren- 
cy is  felt  and  deprecated  ;  for,  by  this  monopoly,  the  pri- 
ces of  domestic  and  foreign  exchanges  are  advanced  or  va- 
ried, to  suit  the  interest  of  these  monopolizing  chartered 
companies. 

The  people  suffer  much  inconvenience,  also,  from  the 
want  of  small  change  in  specie,  owing  to  the  banks  hoard- 
ing it  up  in  their  vaults,  or  collecting  it  for  exportation,  to 
enable  them  profitably  to  draw  bills  upon  foreign  markets 
to  which  they  export  it.  This  also  raises  the  price  of  ex- 
changes, and  of  all  imported  articles  of  merchandise. 

In  the  western  states,  at  this  moment,  the  expense  of  ob- 
taining a  bill  on  New  York  of  one  hundred  dollars,  is  often 
equal  to  the  expense  of  importing  from  New  York  the 
very  articles  purchased  for  the  money  there. 

Reader,  if  you  are  an  elector,  and  have  voted  for  a  sup- 
porter of  chartered  banks,  remember,  that  through  him, 
you  vote  for  this  very  state  of  things,  which  you  so  much 
deprecate.     If  you  will  read  this  little  volume,  your  own 


160  duncombe's  free  banking. 

common  sense  will  enable  you  to  judge,  whether  or  no  the 
author  has  shown  you  a  safe,  certain,  feasible  remedy  for 
the  various  defects  of  our  present  chartered  bank  paper. 
If  you  approve  of  his  plan  of  republican  free  banking,  as 
one  of  the  sovereign  people,  it  is  not  only  your  privilege, 
but  your  bounden  duty,  to  encourage  its  immediate  adop- 
tion. If  you  have  a  choice  in  the  kind  of  money  you  are 
to  use,  have  you  not  a  constitutional  right  to  enjoy  the  grati- 
fication of  that  choice,  as  well  as  the  banker  or  speculator, 
who  may  be  interested  in,  and  therefore  contented  with,  the 
present  uncurrent  bank  paper  ? 

While  a  few  privileged  individuals,  enjoy  by  law  the 
exclusive  monopoly  of  the  business  of  banking,  of  the  ex- 
changes, and  of  the  currency,  specie  must  become  more 
and  more  scarce  ;  exchanges  more  and  more  uncertain,  and 
the  price  of  the  same  higher  and  higher,  with  every  evolu- 
tion of  trade. 

Bankers  will  sell  their  notes,  their  drafts,  "(and  through 
their  agents,  the  brokers,)  their  specie,  to  the  highest  bidder. 
That  is,  they  will  make  the  best  mai-ket  of  their  credit, 
their  capital,  and  their  legal  privilege  of  banking,  that  is  in 
their  power.  For  this  is  in  exact  accordance  with  the  laws 
of  their  situation. 

The  speculator,  who  purchases  commodities  in  the  west- 
ern country,  for  sale  in  the  eastern  cities,  can  pay  for  the 
loan  of  his  money  in  the  eastern  market  at  much  less  ex- 
pense to  himself,  than  the  regular  trader  in  the  western  city, 
whose  business  is  purely  domestic.  He  monopolizes  the 
money,  by  paying  the  banker  (indirectly,  probably,)  more 
than  legal  interest ;  and  this  enables  him  to  monopolize  the 
business  or  trade  in  ^vhich  he  is  engaged,  and  to  regulate  the 
prices  of  the  articles  in  which  he  deals,  by  which  the  pro- 
ducer receives  less  for  his  products,  or  manufactures,  while 


duncombe's  free  banking.  161 

the  consumer  pays  more  for  them — making  a  dead  loss  to 
both,  without  any  other  benefit  than  that  of  supporting,  in 
comparative  idleness  and  luxury,  a  large  number  of  bank- 
ers, brokers  and  speculators. 

Self-interest,  being  the  motive  power  of  most  human  ac- 
tions, and  the  only  avenue  to  the  favors  of  chartered 
banking  companies,  the  speculator  finds  abundant  means  of 
monopolizing  their  favors  ;  which  he  does,  by  making  his 
notes  due  in  a  distant  market,  where  the  sale  of  the  draft 
for  their  re-payment  is  worth  more  than  it  would  be  in  the 
vaults  of  the  banks  ;  and  in  numerous  other  ways,  the 
speculator  increases  the  dividends  of  the  banks  above  the 
ordinary  rate  of  interest  or  profits  they  make  on  their  reg- 
ular loans. 

He  next  establishes  the  prices  of  the  commodities  in  which 
he  deals,  to  suit  his  own  interest,  relying  upon  the  bank  for 
such  credit  as  he  may  require — not  from  their  preference 
for  him,  for  he  well  knows  they  have  no  such  preference. 
He  relies  upon  their  own  interest — he  is  secure  and  must 
succeed. 

The  business  of  banks  of  issue  is  to  lend  their  credit. 
This  done,  they  have  the  power  to  regulate  the  exchanges, 
that  is,  the  price  of  bills  between  distant  parts  of  the  Uni- 
ted States,  and  even  between  the  United  States  and  Lon- 
don. 

Self-interest  being,  as  was  just  remarked,  the  law  by 
which  monied  corporations  are  governed,  the  double  profits 
made  upon  the  discount  of  notes,  where  the  re-payment  is 
to  be  made  in  a  distant  place,  mduces  the  bankers  to  extend 
their  discounts  to  the  utmost  verge  of  their  abilities,  and  of- 
ten far  beyond  their  means  of  redeeming  their  notes  in  spe- 
cie when  demanded. 

To  save  their  charters,  banks  frequently  firstly  resort  to 


162  duncombe's  free  banking. 

contractions,  then  to  suspensions  of  specie  payment ;  or 
they  convert  their  banking  house  into  a  broker's  office,  and 
commence  buying  and  selling  exchanges  ;  or  they  turn  their 
business  over  to  their  agent  the  broker,  to  make  as  much 
money  out  of  their  bank  monopoly  as  they  legally  can.  To 
this,  also,  they  are  impelled  by  the  law  of  their  situation. 

Banks,  however,  frequently  resort  to  various  other  sub- 
terfuges to  avoid  suspensions,  and  yet  to  retain  their  char- 
ters, after  they  have  expanded  the  currency  far  beyond 
their  power  to  redeem  their  notes  in  specie,  and  beyond 
the  abilities  of  the  channels  of  currency  to  contain — when 
the  exportation  of  specie,  by  the  immutable  law  of  sup- 
ply and  demand,  must  ensue.  Among  the  schemes 
practiced,  are  those  of  issuing  post  notes — notes  due  at  as 
distant  a  date  as  may  be  made  to  circulate,  sometimes  bear- 
ing interest  and  sometimes  without  interest,  drawn  in  the 
similitude  of  bank  notes  and  circulated  as  money,  to  the 
full  extent  of  public  gullibility. 

This  flush  of  money  serves  to  increase  the  amount  of 
sales  of  foreign  merchandise  for  domestic  consumption.  It 
delays,  but  does  not  remedy  the  evil.  Yet,  with  this  excess 
of  paper  money,  prices  do  not  rise,  perhaps,  as  high  as 
might  have  been  expected  from  the  unlimited  discounts  of 
the  banks  ;  as  the  speculator,  by  monopolizing  the  money 
of  the  place,  has  been  able  to  fix  the  price  of  the  article  he 
wishes  to  purchase  lower  than  the  competition  between  the 
regular  traders  of  the  place  would  have  made  it,  had  the 
money  of  the  place  been  left  free  from  the  interference  of 
monopolizing  speculators,  who,  by  the  aid  of  a  monopoly 
of  bank  credit,  would  not  only  regulate  the  purchasing  price 
of  his  commodities,  but  also  influence  their  sale  price,  which 
men  with  small  capitals  would  be  unable  to  do. 

The  speculator  may  be  enriched — the  bank  may  be  prof- 


DUNCOMBE^S  FREE  BANKING.  163 

ited — but  the  farmer,  the  mechanic,  and  laborer,  frequently 
receive  of  even  this  inflated  inconvertible  bank  paper,  less 
than  they  might  have  received  in  cash  for  their  commodi- 
ties, but  for  this  chartered  bank  monopoly. 

But  the  worst  of  all  remains  to  be  told.     After  the  mon- 
ey has  been  given  by  the  bank  to  one  or  more  foreign  spec- 
ulators, no  sjjecie  is  returned  to   the  bank  from  the  distant 
city  for  the  bill  that  v^^as  received  for  the  loan  to  the  specu- 
lator.    It  was  merely  an  exchange  of  liabilities  ;  by  which 
are  formed  facilities   for  extending  and  increasing  importa- 
tions beyond  the  natural  limits  of  supply   and   demand,  or 
the  sound  principles  of  trade  and  commerce.     The  banker 
receives   either  his  own  notes  for  the  bill,  or  what  is  still 
worse,  he  discounts  a  new  fictitious  paper,  the  private  note 
of  some  debtor  in  the  place  where  the  money  is  due  for  the 
bill,  and  after  deducting  the  exchange,  the  bank  has  estab- 
lished by  this  monopoly,  and  the  interest,   the  balance  be- 
comes a  new  credit.     Inland  importations  are  thus  inci*eas- 
ed — foreign  importations  are  also  thereby  enhanced — the 
balance  of  trade  is  turned  against  the  western  consumer — 
and,  ultimately,  against  the  United  States  with  foreign  coun- 
tries.    The  American  debtor  in  a  foreign  market,  must  pay 
an  advanced  price  on  bills  of  exchange,  or  a  premium  on 
gold  and  silver  to  meet  his  remittances  ;  the  country  becomes 
drained  of  its  specie  ;  bank  loans  are  limited ;  the  price  of 
commodities  fall  below  their  cost  of  production  ;  enterprise 
and  industry  are  checked ;  public  and   private   confidence 
become  shaken  ;  the  bonds  of  society  become  relaxed ;  re- 
spect for  the  laws  are  diminished ;  the  passion  of  self-love 
predominates  ;  and  private  interest,  the  love  of  gain^  and 
the  desire  of  power,  sway  the  destinies  of  this  great  nation ; 
and  as  the  word  of  a  Despot  directs  the  fate,  the  peace  and 
prosperity  of  his  government,  so  does  iYiq  private  interest  of 


164  DUNCOMBE  S  FREE  BANKING. 

incorporated  companies  rule  the  destinies  of  this  otherwise 
powerful  and  happy  people. 

The  legally  privileged  order  of  bankers,  with  brokers 
and  speculators,  may  become  rich,  but  the  people  must  be- 
come poor.  And  will  the  people,  who  make  and  unmake 
those  privileged  orders,  still  madly  support  theml  I  say, 
no.  Show  them  how  to  avoid  the  iron  rod  of  these  bank 
task-masters,  and  they  will  not  submit  to  them.  The  me- 
chanic, the  farmer,  and  the  laborer,  know  that  the  banks  are 
a  heavy  annual  tax  upon  their  labor — destroying  their  hab- 
its of  industry  and  economy,  and  inducing  luxurious  extrav- 
agance and  indolence,  and  not  unfrequently  intemperance  ; 
while  the  commercial  community  admit,  that  improper  over- 
expansions,  by  the  immutable  law  of  supply  and  demand, 
must  produce  consecutive  contractions  of  the  currency — the 
natural  effects  of  banking  monopolies,  and  of  the  laws  of 
the  situation  of  incorporated  companies. 


DtJ^XOlM:BE*S  FREE   BANKtNOk  165 


CHAPTER  XXX. 

ON  COMPARISONS  OF  THE  CURRENCY  WITH  THE  GOVERNMENT*. 

The  government  and  administration  of  the  proposed  bank  compared  to  the  polit- 
ical machinery  of  governments. — On  the  difference  between  the  centralization 
of  government  with  a  centralized  administration,  and  a  centralized  governrarnt 
with  a  divided  administration.— The  administration,  in  monarchies,  more  cen- 
tralized than  the  government ;  as  well  as  in  mixed  monarchies. — The  concur- 
rence of  the  people's  representatives  necessary  to  the  governmcnt.-^The  cen- 
tralization of  municipalities  in  monarchies. — Republican  townships  have  numer« 
ous  administrators — each  independent  of  the  others — each  under  a:centraiizcd 
government. — The  courts. — The  people,  through  the  ballot-boxes.— 'Proposed 
plan  CENTRALIZES  the  government  of  the  currency,  like  the  general  govern* 
mentof  the  Union, — Divides  the  administration  of  the  currency — This  resembles 
the  administration  of  townships.— One  bank  of  issue — Numerous  banks  of  dis- 
count— Directors  of  both  responsible  totlielaws  and  to  the  sovereign  people.— The 
stock,  specie,  issues,  reserved  fund,  dividend.*?  and  government  centralized — The 
'election  of  olficers,  the  discounts,  loans,  collections,  securities,  and  entire  business 
i»f  the  banks  of  discount,  divided. — The  old  United  States  Banks,  with  centrali- 
2ed  administrative  powers,  directed  the  operations  of  their  branches,  discounts, 
expansions  and  contractions  of  the  currency,  and  dealt  in  exchanges — The 
whole  currency  subservient  to  their  interests. — A  centralized  administration  of 
the  currency  dangerous  to  republican  institutions — ^injurious  to  trade  and  com- 
merce— by  its  own  laws  amouopoly. — In  republics,  government  should  be  cen- 
tralized— administration  divided — the  law  powerful — The  administrator  insignifi- 
cant. 

In  monarchical  governments,  the  administration  of  the 
government  is  even  more  centralized  than  the  government. 

In  mixed  monarchies,  as  those  of  England  and  France, 
the  government  is  in  part  divided,  and  the  administration 
centralized  :  the  people,  or  portions  of  them,  elect  one 
branch  of  the  legislature. 

In  mixed  monarchies,  where  the  concurrence  of  the 
three  branches  of  the  legislature  is  requisite  to  the  passage 
of  all  laws,  the  house  of  representatives  possesses  at  least 
a  negative  power  over  their  enactments,^  but  without  pos- 
sessing any  influence  over  their  administration.  The  ad- 
ministration is  centralized  in  the  Chief  Magistrate,  execu- 
ted by  the  persons  of  his  appointment,  in  his  name,  and  ac- 
cording to  his  will  and  pleasure,  subject  to  his  removal  from 
office,  and  to  fine  or  imprisonment  at  his  pleasure. 

In  municipalities,  under  a  monarchy,  the  administration 
is  centralized.     The  mayor  is  the  head  of  the  Gorporationi 


166  duncombe's  free  banking. 

and  the  aldermen  and  common  council  men  are  more  or 
less  dependant  upon  his  concurrence  in  all  important  meas- 
ures. 

In  townships  in  America,  the  administration  is  divided 
between  a  great  number  of  independent  magistrates,  elec- 
ted by  the  people  for  distinct  magisterial  and  administra- 
tive duties.  In  one  township,  may  be  found  from  twelve 
to  twenty  magisterial  officers,  administering  the  several 
functions  of  the  township  ;  each  independent  of  the  others, 
amenable  to  the  superior  courts  in  their  individual  capaci- 
ties, and  accountable  to  the  people  at  their  annual  election. 
Wherever  they  are  not  altogether  independent  of  each 
other,  it  is  the  government  of  the  township  that  connects 
their  duties,  and  not  its  administration. 

In  the  United  States,  the  laws  provide  for  the  organiza- 
tion of  townships,  and  j^i'escribe  general  rules  of  govern- 
ment ;  still  the  adininistration  of  the  township  is  indepen- 
dent of  either  the  general  or  provincial  government,  each 
township  officer  is  as  independent  of  every  other  body  or 
officer  as  is  the  president  of  the  United  States — they,  like 
him,  are  bound  by  particular  laws,  and  accountable  to  the 
sovereign  people,  through  the  ballot-boxes,  when  they  be- 
come candidates  for  re-election. 

For  the  purpose  of  rendering  the  currency  of  the  coun- 
try republican,  the  plan  here  recommended  proposes,  that 
the  government  of  the  currency  shall  be  centralized,  upon 
principles  somewhat  analagous  to  those  of  the  general  gov- 
ernment of  the  United  States  ;  and  the  administration  of  the 
currency  divided,  as  is  the  political  administration  of  the 
townships. 

Upon  the  plan  of  the  proposed  free  banking  system,  the 
bank  of  the  United  States  is  made  the  bank  of  issue  j  and 
the  directors  are  entrusted  with  the  power  of  "issuing  and 


DUTfCOMBE  S  FREE  BANKING.  167 

promulgating  general  rules  for  the  uniform  government  of 
the  state  banks  of  re-issue,  and  of  the  local  banks  of  discount, 
but  without  power  to  interfere  with  either,  beyond  certain 
clearly  defined  limits — nor  in  any  way  with  the  administra- 
lion  of  the  banks  of  discount,  any  more  than  the  general' 
ofovernraent  of  the  Union  interferes  with  the  administra- 
tion  of  the  townships. 

The  government  of  all  the  issues  of  currency,  whether 
of  the  precious  metals,  or  of  the  paper  intended  to  circu- 
late as  money  to  supply  the  deficiency  of  the  precious  met- 
als, occasioned  by  their  exportation,  should  be  centralized. 
It  should  be  under  the  immediate  control  and  regulation  of 
the  whole  people,  through  directors  freely  elected  from 
every  part  of  the  Union.  That  the  stock  subscribed,  and 
the  specie  received  thereon,  may  be  equalized  throughout 
the  Union;  that  the  reserved  fund — for  the  safety  of  the 
bill-holders,  to  be  applied  to  the  relief  of  any  local  bank, 
whenever  any  casualty  shall  render  it  temporarily  unable  to 
redeem  its  notes  at  sight,  and  for  that  purpose  should  be  sub- 
ject to  the  disposition  of  the  directors  of  the  bank  of  issue. 
This  reserved  fund  is  intended  to  redeem  atthe  instant,  such 
notes  of  the  banks  of  any  state  as  shall  not  have  been  redeem- 
ed on  demand,  until  such  bank  shall  be  again  able  to  meet 
their  notes  in  specie  and  re-pay  the  amount  thus  borrowed. 

And  also  that  the  dividends  may  be  apportioned  equally 
between  all  the  stockholders,  in  proportion  to  their  respec- 
tive amounts  of  stock. 

To  illustrate  this  point  more  clearly,  we  will  suppose,  that 
the  business  done  by  the  bank  at  New  Orleans,  would  en- 
able the  directors  of  that  bank  to  have  divided  ten  per 
cent,  upon  their  business,  with  the  bills  apportioned  to  them, 
upon  the  specie  in  their  vaults,  while  the  bank  at  Boston  may 
not  have  been  able  to  divide  over  six  per  cent,  per  annum; 


168  duncombb's  free  banking. 

and  supposing  this  difference  in  the  amounts  of  their  divi- 
dends throughout  the  Union,  when  the  profits  of  all  the 
banks  are  summed  up,  the  rate  would  be  found  to  be  eight 
per  cent.,  which  would  be  paid  to  all  the  stockholders  equal- 
•ly.  This,  too,  would  aid  in  giving  the  currency  a  uniform 
circulation  throughout  the  country^  since  the  government 
would  be  uniform,  central  and  identical — with'the  adminis- 
tration divided,  and  adapted  to  the  wants,  interests  and  in- 
clinations of  the  people  in  every  part  of  the  Union. 

The  old  United  States  banks  possessed  centralized  ad- 
ministrative powers,  from  which  financial  and  political  evils 
were  seriously  complained  of.  The  mother  bank  reg- 
ulated the  amount  of  business  that  each  branch  was  to  do  ; 
and  directed  the  kinds  of  business  that  each  branch  was  to 
be  engaged  in.  If  dealing  in  foreign  or  domestic  exchan- 
ges was  likely  to  be  more  profitable  than  lending  money, 
this  was,  by  order  of  the  parent  bank,  made  the  business 
of  the  branches,  as  well  as  of  the  parent  institution,  The 
currency  was  expanded  where  the  bank  or  a  branch  wish- 
ed to  sell  bills  of  exchange,  that  the  temporary  flush  of 
money  might  raise  the  price  of  exchanges ;  and  contracted 
at  such  points  as  she  wished  to  buy  bills,  that  the  tempora- 
ry scarcity  of  money  might  lessen  the  price. 

The  bank  and  branches,  having  the  whole  monopoly  of 
the  exchanges,  and  from  her  being  the  only  dealer  in  ex- 
change, the  power  and  influence  of  her  immense  capital, 
and  almost  unlimited  power  of  augmenting  and  diminish- 
ing the  amount  of  paper  at  any  one  point,  whenever  it 
suited  her  interest,  as  well  as  from  her  greater  facility  of 
making  remittances  from  place  to  place,  and  her  better  and 
more  perfect,  as  well  as  more  extended  organization  for  im- 
mense financial  operations,  enabled  her  to  fix  the  rates 
gf  exchange  to  suit  her  private  interest.     By  contracting 


m^mmmmmmm^mi'imfi'^f'i^mimfm 


duncombe's  free  banking.  169 

the  currency,  for  which  purpose  it  was  only  necessary  to  re- 
fuse or  delay  her  ordinary  discounts  for  a  few  days,  she 
could  enhance  the  value  of  money  for  immediate  use,  and 
thus  lessen  the  price  of  bills  of  exchange  in  the  market  to 
suit  her  private  purposes. 

The  unjust  and  improper  exercise  of  the  influence  and 
powers  created  by  the  centralized  administi'ation  of  the 
United  States  bank,  has  very  justly  alarmed  the  lovers  of  a 
sound  currency  and  republican  institutions. 

In  the  proposed  plan,  the  immense  dangerous  power  and 
influence  of  a  mammoth  bank,  with  a  centralized  adminis- 
tration, is  entirely  removed,  while  the  benefits  of  a  central- 
ized government  of  the  currency  are  increased  and  re- 
tained. 

Thus  we  see  it  is  the  centralized  administration  of  the 
currency,  which  is  so  much  to  be  feared,  should  congress 
charter  another  United  States  bank,  with  branches  through- 
out the  Union,  and  not  the  centralization  of  the  government 
of  the  currency. 

In  a  republic  where  the  people  are  the  sovereign  power, 
the  administration  of  the  government  cannot  be  too  much 
divided,  nor  the  government  too  much  centralized;  that  the 
power  may  exist,  but  the  representative  not  be  perceived  ; 
that  the  law  may  govern  and  be  powerful,  and  the  admin- 
istrator be  insignificant  and  concealed.  In  this  particular, 
the  elective  system  possesses  superior  excellence,  and  is 
admirably  adapted  to  the  conduct  of  the  finances  and  bank- 
ing of  the  United  States. 

In  a  centralized  government  and  divided  administration, 
consists  the  excellencies  of  the  United  States  constitution  : 
numerous  independent  magistrates,  with  duties  well  defin- 
ed, govern  the  country. 

In  the  centralized  government,  with  a  divided  adminis- 


170  duncombe's  free  BANKHSrCf. 

tration,  consists  the  superiority  of  the  present  constitution 
of  these  United  States,  over  the  first  confederacy  of  the 
several  states,  as  well  as  over  all  other  former  confederacies 
of  republican  states,  ancient  or  modern.  The  government 
is  general,  and  its  principles  of  action  and  of  operation  uni- 
form, with  local  administrations,  adapted  to  promote  the 
interests  and  immediate  relief  of  the  wants  and  inclinations 
of  the  various  parts  of  the  Union.  The  administration  is 
divided,  and  the  administrators  directly  responsible  to  the 
people  for  the  faithful  discharge  of  the  duties  of  their  res- 
pective offices — each  in  his  private  person  and  individual 
capacity  through  the  courts  of  law. 

The  government  of  the  United  States  is  an  unit,  while 
the  administrative  authority  is  almost  entirely  restricted  to 
the.  townships. 

Petoqueville  says,  *'in  no  country  does  the  law  hold  such 
absolute  sway  as  in  America  : 

"  The  administrative  power  in  the  United  States  presents 
nothing,  either  central  or  hierarchical  in  its  constitution, 
"Nyhich  accounts  for  its  passing  unperceived. 

**  The  power  exists,  but  its  representative  is  no  where 
to  be  perceived. 

"  The  magistrates  arc  numerous,  and  the  law  carefully 
prescribes  a  circle  of  action  for  each,  while  they  have  a 
ight  to  perform  their  functions  independently  of  any  au- 
ihority/' 


buncombe's  FKEE  BAiVKING.  171 


CHAPTER  XXXI. 

ON  THE  CENTRALIZED  GOVERNMENT  OF  THE  CURRENCY,  AND 
ITS  DIVIDED  ADMINISTRATION. 

A  centralized  administration  of  the  currency,  from  the  laws  of  its  situation,  anti- 
republican. 

When  the  admmistration,  as  well  as  the  government  of 
the  currency,  is  centralized,  by  the  laws  of  its  situation  it  is 
anti-republican,  and  dangerous  to  the  perpetuity  of  repub- 
lican institutions,  as  well  as  to  the  equality  and  liberty  of 
the  people,  by  connecting  in  the  hands  of  a  few  irresponsi- 
ble individuals,  the  immense  power  and  influence  of  all  the 
money  of  the  country. 

In  the  system  of  currency  hereby  proposed,  all  this 
monetary  power  and  influence  is  entirely  removed,  and  all 
its  dangerous  financial  and  political  effects  obviated,  by  the 
division  of  its  administration  ;  while  the  perfect  uniform 
convertibility  of  the  paper  intended  to  circulate  as  money, 
and  the  equalized  circulation  of  the  currency  of  each  state, 
throughout  all  the  states  of  the  Union,  will  be  happily  pro- 
vided for  by  the  centralization  of  the  government  of  the 
currency. 


172  buncombe's  free  banking* 


CHAPTER  XXXII. 


OF    BANK   INFLUENCE, 

Of  batik  influence. — The  bank  of  Upper  Canada — the  only  bank  in  Upper  Canada 
inl83(>— capital  $400,000— Government  stock  $100,000— eight  directors— Gover- 
nor appoints  two  directors.— Grievance  Report,  at  the  Colonial  Office,  (Eng-.) — 
Political  influence  complained  of — OflTicers  of  the  bank  generaMy  tories — Bank 
agents  are  tories— The  committee  of  the  Assembly,  in  1830.  upon  the  bank,  ask 
for  information — that  refused — Parliament  is  dissolved,  and  the  capital  of  the 
bank  increased,  without  giving  the  information  sought  — The  House  of  Repre- 
sentatives report  upon  the  United  States  Bank — Mr.  Clayton  chairman — Members 
of  Congress  charged  with  being  interested — Editors  of  news-papers  subsidized — 
Directors  parties  to  this  improper  influence — Responsibility  to  public  opinion — 
Monied  interests  control  the  press,  and  influence  representation,  and  a  bandage 
over  the  people's  eyes. — The  dangerous  effects  of  an  United  States  Bank  and 
branches — a  tremendous  engine  in  the  bands  of  a  corrupt  administration,  by  the 
laws  of  Its  situation — A  chartered  bank  must  support  a  friendly  administration — 
must  make  as  much  money  as  it  lawfully  can — The  bank  would  be  made  the  fiscal 
agent  of  the  goveruraent — The  bank  and  government  would  perpetuate  each  oth- 
er.— A  credit  aristocracy  dangerous  to  republican  institutions. — Bank  operations — 
how  rendered  serviceable. — The  Bank  of  England — notes  lawful  tender — based 
upon  credit— Connection  dangerous  to  American  currency. — Political  and  finan- 
cial shocks— etfects  in  England  felt  in  America. — Specie  exported  in  1839,  at  a 
loss — benefit  to  the  Bank  of  England. — United  States  Bank  and  branches  could 
control  elections — Republicanism  would  cease. — Rothschild,  Baring,  Wilson, 
govern  the  United  States — war — peace — manufactures — capitalists — The  reme- 
dy— separate  currency  from  credit — from  private  interest — from  politics — render 
it  republican — The  people  elect  the  directors. — Private  interest  of  the  people  in 
the  government — Elect  directors  of  banks  of  discount — Bank  of  issue  separate. — 
Gold  and  silver  the  true  elements  of  a  sound  currency. — Directors  give  good  se- 
curity— bill-holders  secure — Issue  no  small  bills — paper  money  made  current  and 
interchangeable — More  specie  in  the  vaults  of  the  bank  than  bank  notes  in  circu- 
lation.— The  object  of  this  book  is  to  preduce  a  sound  currency— centralize  the 
goveruraent  of  the  currency — divide  its  administration — modify  the  usury  laws 
and  the  bankrupt  laws,  and  have  money  sound  and  plenty. 

By  the  followirig,  it  will  be  seen  to  what  extent  a  bank, 
connected  with  the  government,  may  oppress  a  people. 

In  1830,  when  this  account  was  sent  to  England,  the  cap- 
ital of  the  Bank  of  Upper  Canada,  the    only  bank  then  in 
the   Province,  was   c€100,000   Province  currency — $400, 
000 — one-fourth  of  which  was  owned  by  the  Colonial  Gov- 
ernment, who  appointed  two  of  its  eight  directors. 

G-RiEVANCE  Report  C. — (From  the  appendix  to  a  Me- 
morial received  at  the  Colonial  Office,  England.) — "  The 
.government  and  its  officers  have  the  bank  under  their  con- 
arol,  and  direct  its  vast  powers  at  their  pleasure.  It  is  not 
ciaecessarv  for  me  to  assume  it  as  a  fact,  that  they  use  their 


DtJNCOMBE^S  FItEEJ  BANKINO*  173 

powers,  (one  of  which  is  to  loan  millions,  yearly,  of  paper, 
for  which  they  are  not  individually  responsible  to  the  bill- 
holder,)  for  the  purpose  of  rewarding  political  partizans. 
The  history  of  all  political  parties  in  such  a  government  as 
that  of  Upper  Canada,  will  enable  the  reader  to  draw  a 
proper  inference.  The  bank  has  agents  in  the  several 
Districts,  who  are  believed  to  be  in  the  receipt  of  large 
incomes  drawn  from  the  agencies. 

"  They  are  usually  found  among  the  most  active  parti- 
zans of  those  in  authority. 

"In  the  year  1830,  the  Assembly  appointed  a  commitee 
on  the  currency,  with  power  to  enquire  into  the  manage- 
ment of  the  bank,  which  had  solicited  an  extension  of  its 
stock.  I  was  chairman  of  that  committee,  and  reported 
certain  resolutions  for  information  desired  from  the  bank. 
The  house,  by  an  unanimous  vote,  sustained  the  resolutions, 
and  the  bank  refused  their  information,  contrary  to  the 
terms  of  its  charter.  The  dissolution  of  that  Parliament 
enabled  the  bank  to  obtain  its  charter,  without  disclosing 
the  general  condition  of  its  affairs  to  the  body,  which 
granted  it  a  large  additional  share  of  the  power  of  the  gov- 
cniment.  The  report  of  the  majority  of  the  committee,  ap- 
pointed by  the  House  of  Representatives  of  the  United 
States,  to  examine  into  the  proceedings  of  the  directors  of 
the  United  States  Bank,  before  renewing  its  charter,  and 
made  this  year  to  Congress,  by  Mr.  Clayton,  shows,  that 
members  of  Congress,  and  editors  of  public  journals,  had 
been  tampered  with,  and  the  press  subsidized,  to  a  very  great 
extent,  and  that  the  whole  board  of  directors  had  been  par- 
ties to  this  undue  influence  exercised.  If  these  things  are 
in  a  government  like  the  United  States,  where  there  is  a 
general  responsibility  to  the  public  opinion  acknowledged 
by  public  men,  what  may  not  be  presumed  in  a  secret  in- 


174  dukcoMbe's  free  banking. 

stitution  like  the  Upper  Canada  Bank,  in  the  hands  of  the 
politicians  1 

"  If  a  capitalist's  monied  interest  can  succeed  in  influen* 
cing  representation  and  the  press,  that  representation  will 
become  more  and  more  its  instrument,  and  a  bandage  over 
the  eyes  of  the  public, '  the  powerful,  and  in  the  hands  of  a 
bad  administration,  the  irresistible  and  corrupting  influence, 
(observes  Mr.  McDuffie,the  chairman  on  the  ways  and  means, 
in  his  report  to  the  House  of  Representatives  of  the  Uni- 
ted States,  1830,)  which  a  government  bank  would  exer- 
cise over  the  elections  of  the  country,  constitutes  an  objec- 
tion more  imposing  than  all  others  united.  No  matter  by 
what  means  an  administration  might  g^t  into  power,  with 
such  a  tremendous  engine  in  their  hands,  it  would  be  al- 
most impossible  to  displace  them,  without  some  miraculous 
dispensation  of  Providence.' " 

If  we  should  ever  be  so  unfortunate  as  to  have  a  corrupt 
Executive  at  the  head  of  the  general  government  of  the 
United  States,  with  the  whole  currency  of  the  country  sub- 
ject to  the  disposal  of  a  few  interested  individuals,  as  direc- 
tors of  an  United  States  Bank  and  branches,  at  the  time  of 
a  general  election,  would  not  such  an  Executive  perpetu- 
ate themselves  during  pleasure  ]  A  chartered  bank  must 
support  the  administration  which  will  patronize  it :  by  the 
laws  of  its  situation  it  cannot  do  otherwise.  It  has  been 
created  for  the  purpose  of  making  the  most  money  out  of 
the  public,  with  the  least  labor  and  cost,  that  can  be  legally 
made.  It  has  nothing  in  common  with  the  community.  Its 
object  and  entire  business  is  that  of  making  money.  A  cor- 
rupt Executive  would  find  no  difficulty  in  securing  its  sup- 
port, by  affording  it  an  opportunity  of  increasing  its  profits ; 
perhaps  appointing  some  of  its  oflScers  to  the  Treasury  De- 
partment of  state — making   the  institution  the   recipient  of 


.J^ 


BUNCOMBE  S  FREE  BANKING.  175 

tKe  public  revenue  ;  and,  if  necessary  to  secure  its  ut- 
most support,  allow  it  a  large  deposite  of  public  money 
to  bank  upon,  free  from  cost,  and  even  to  allow  it  a  profit, 
a  per  centage  upon  the  receipts  and  disbursements  of  the 
public  revenue.  Such  an  institution  would  perpetuate  it- 
self by  perpetuating  an  administration  that  would  use  it  for 
political  purposes  ;  every  debtor  in  the  United  States  (and 
who  would  not  be  in  debt  with  such  a  credit  currency,) 
would  be  directly  or  indirectly  pledged  to  the  support  of 
the  bank  and  the  party  that  would  support  it.  A  monied 
aristocracy,  or  rather  a  credit  aristocracy,  at  home,  would 
regulate  the  affairs  of  the  nation — if  we  were  fortunate 
enough  to  escape  the  grasp  of  foreign  mercenaries,  which 
probably  would  not  long  continue — but  liberty  and  equali- 
ty, with  republicanism,  would  exist  only  in  name.  The 
American  Republic  would  soon  follow  in  the  tracks  of  most 
former  republics,  and  its  glory  and  excellence  fade  and  be 
forgotten,  or  be  blotted  from  the  page  of  history  as  a  dan- 
gerous dream  of  imaginary  happiness. 

While  upon  the  subject  of  bank  influence,  it  may  not  be 
amiss  to  suppose  an  incorporated  banking  company  doing 
the  business  of  the  money  currency  of  these  United  States. 
The  directors  to  be  men  with  whom  private  interest,  and 
the  importunities  of  numerous  hungi-y  money  borrow- 
ers could  have  no  effect.  That  during  times  of  foreign 
and  domestic  prosperity,  they  had  restricted  their  discounts 
to  the  actual  demand  for  currency,  and  that,  consequently, 
during  the  reverses  of  the  money  market,  they  had  been 
able  to  increase  their  discounts  and  relieve  the  pressure 
in  the  United  States,  however  severely  it  may  have  been 
felt  abroad.  Would  not  the  financial  and  political  power  of 
such  a  company  be  dangerous  to  the  liberties  and  commer- 
cial prosperity  of  the  nation  ?     For  it  should  be  recollect- 


176  DUNCOMBE'S  FREE  BANKING. 

ed,  that  so  far  as  credit  is  connected  with  the  currency,  the 
American  money  market  is  in  much  danger  from  the  effects 
of  shocks  in  the  English  money  market,  owing  to  the  cir- 
cumstance that  the  basis  of  the  circulating  medium  in  Great 
Britain  is  credit,  and  that  the  capital  of  the  Bank  of  Eng- 
land is  in  part  composed  of  their  irredeemable  national 
debt ;  and  that,  consequently,  if  ever  the  credit  of  the  Brit- 
ish government  should  be  shaken,  that  shock  must  be  felt 
almost  simultaneously  by  the  Bank  of  England — and  vice 
twrsa. 

The  Joint  Stock  Banks  generally  pay  their  debts  in  Bank 

of  England  paper,  which,  by  the  bye,  is  lawful  tender  in 
the  payment  of  all  debts  except  its  own ;  in  fact,  the  loans 
of  the  different  banking  houses  in  London,  are  mostly  com- 
posed of  the  notes  of  the  Bank  of  England.  Should  a 
panic  occur  in  the  money  market  of  England,  the  holders 
of  bank  of  Ewgland  notes  would  immediately  demand  spe- 
cie for  them,  and  when  the  specie  should  all  be  drawn  from 
the  bank,  as  a  matter  of  course,  it  must  suspend  specie  pay- 
ment, or  avow  its  insolvency — (whata  false,  yet  fashionable, 
term  for  bankruptcy  is  suspension  ?) 

In  such  an  event,  the  currency  of  the  United  States 
would  be  involved  in  the  shock.  A  run  would  be  made 
upon  American  banks,  upon  the  first  moment  of  the  arrival 
of  the  news  of  the  run  upon  the  bank  of  England  for 
specie  to  save  the  bank  of  England  from  ruin,  and,  perhaps, 
the  nation  from  revclution.  American  stcoks,  previously 
owned  in  England,  would  be  re-sold  in  the  American  mar- 
ket at  such  prices  as  would  command  purchasers,  and  spe~ 
cie  would  be  hurried  to  England  to  meet  the  high  prices> 
that  it  would  be  likely  to  command  there.  We  have  seen 
gold  and  silver  exported  to  England,  during  the  late  threat- 
ened panic   there,,  by  the   friends  of  the  bank  of  England 


dvncombe's  free  banking.  17^ 

in  the  United  States,  to  meet  the  emergencies  of  the  bank 
of  England,  as  well  probably,  as  to  profit  by  the  first  high 
prices  of  specie  after  thebanks  should  have  suspended.  What 
effect  this  timely  transportation  of  specie  may  have  had  in 
preventing  the  threatened  suspension,  I  am  unable  to  say, 
and  the  circumstance  of  the  exportation  of  specie  in  1839, 
at  a  loss  (since  remittances  could  have  been  made  in  bills 
at  less  expense,)  is  only  referred  to  to  show  the  intimate 
connection  that  exists  between  the  monetary  affairs  of  Eng- 
land with  America. 

But  to  proceed  with  the  investigation  of  the  political 
power  and  influence  of  an  incorporated  banking  company, 
we  will  ask,  what  would  be  likely  to  be  the  course  adopted 
by  a  corrupt  government^  about  to  be  removed  by  the  votes 
of  American  freemen  ]  Wovild  it  not  be  likely  to  pur- 
chase the  support  and  influence  of  a  few  individuals,  who 
could  control  the  whole  currency  of  the  Union  ]  and  if  so, 
could  not  such  an  institution  exercise  an  immense  power 
over  the  liberties  and  fortunes  of  the  people  ?  Could  not 
the  directors  of  the  paper  portion  of  the  currency,  although 
consisting  of  but  a  few  (perhaps  otherwise  obscure,)  indi- 
viduals, fearlessly  say  to  the  Executive  of  these  United 
States,  support  the  bank,  and  the  bank  shall  support  you — 
oppose  the  bank,  and  the  power  of  the  bank  and  branches 
shall  oust  you  from  office.  The  necessities  of  the  one,  and 
the  laws  of  the  situation  of  the  other,  must  produce  an  al- 
liance, offensive  and  defensive,  between  a  credit  aristocra- 
cy and  such  a  political  party.  The  bank,  using  the  legis- 
lature, as  Mr.  Jefferson  said,  as  a  bandage  to  blind  the 
people's  eyes  :  the  subsidy  of  the  press,  which  would  be  the 
natural  consequence  of  such  a  combination,  would  leave 
the  public  bound  hand  and  foot,  and  delivered  into  the 
hands  of  their  oppressors* 


178  duncombe's  free  banking. 

Republicanism  would  only  exist  in  name.  The  stock  of 
the  bank  would  gradually  glide  into  the  hands  of  foreign 
capitalists  ;  and  we  should  have  the  nominee  of  some  for- 
eign Rothschild,  Baring,  or  Wilson,  as  bank  agent  in  each  of 
our  principal  cities,  regulating  the  kind  and  amount  of  cur- 
rency that  the  free  born  sons  of  America  shall  receive  and 
use,  while  foreigners  retained  entire  control  of  **  the  sinews 
of  war,"  and  the  instrument  of  wealth  in  peace. 

How  could  the  American  government  conduct  a  war 
against  England,  extend  commerce,  or  even  increase  do- 
mestic manufactures,  with  the  purse  strings  of  the  treasury 
in  the  hands  of  capitalists,  whether  foreigners  or  Americans, 
who  were  opposed  to  the  measure  1 

The  uncontrolled  and  uncontrollable  passion  for  gain, 
common  to  Americans,  renders  it  far  more  necessary  that 
the  currency  of  the  United  States  should  be  sound,  than 
that  of  any  other  country. 

The  remedy  we  propose  for  the  defective  state  of  the 
currency  is,  to  organize  the  people,  with  power  to  regulate 
the  currency  of  the  country,  as  they  at  this  time  regulate 
its  political  machinery,  through  persons  independently  and 
freely  elected  by  the  people — persons  who  have  no  more 
direct  interest  in  the  business  of  the  bank,  than  an  officer  of 
the  government  has  in  its  finances.  One  common  bond  of 
interest  should  support  the  currency,  as  it  supports  the  po- 
litical machinery  of  the  government ;  but  no  private  inter- 
est should  be  allowed  to  intervene,  to  separate  the  people 
from  the  government,  or  to  strengthen  the  natural  hostility 
of  political  parties. 

All  the  elementary  principles  of  the  government  should 
conduce  to  the  equal  support  of  the  whole  people,  and  to 
the  strengthening  of  the  institutions  of  the  country.  Hence 
the  importance  of  changing  the  elementary  principles  of 


buncombe's  free  banking.  179 

the  currency  of  the  United  States,  from  aristocratic  to  re- 
pubUcan. 

The  strength  of  a  republican  government  consists  in  the 
private  interest  that  each  citizen  has  in  its  support,  and  in 
its  healthful  administration.  The  union  of  public  with  pri- 
vate interest  should  be  promoted  by  the  general  organiza- 
tion of  the  people,  for  the  exercise  of  all  the  pov^rers  and 
privileges  consonant  with  this  object.  They  should  exer- 
cise the  same  influence  over  its  monetary  affairs,  that  they 
do  over  its  literary,  religious  and  political  institutions. 

Currency,  to  become  sound,  must  have  the  paper  por- 
tion of  it  as  perfectly  separated  from  the  influence  of  pri- 
vate interest,  from  credit,  and  from  politics,  as  are  the  pre- 
cious metals. 

The  bank  of  issue  must  be  separated  from  the  banks  of 
discount.  The  issues  of  paper  to  circulate  as  money,  should 
only  be  based  upon  specie.  No  notes  of  other  banks,  pub- 
lic bonds,  or  debts  of  the  United  States,  or  of  the  several 
states,  foreign  or  domestic  exchanges,  or  other  evidences 
of  debt,  either  public  or  private,  should  be  had  recourse  to 
or  used  as  a  basis  for  the  issue  of  paper  to  circulate  as  mon- 
ey. Gold  and  silver  coins,  and  bullion,  are  the  only  true 
elements  of  a  sound  currency ;  and  so  long  as  these  only  are 
used  as  a  basis  for  the  issue  of  paper  to  circulate  as  money, 
and  the  business  of  the  banks  of  discount  is  limited  to  dis- 
counting only  actual  business  paper,  having  but  short  pe- 
riods to  run,  the  currency  may  easily  be  preserved  sound. 

The  directors  should  be  precluded  from  any  interest  in 
the  discounts,  and  held  responsible  to  the  people  for  the 
faithful  discharge  of  their  duties,  which  should  be  all  clear- 
ly defined,  and  well  adapted  to  the  promotion  of  the  great- 
est good  of  the  greatest  numbers,  at  the  least  expense,  or 
danger  of  loss  to  the  public. 


180  duncombe's  free  banking. 

The  securities  given  by  the  directors,  should  be  such, 
that,  with  their  salaries,  and  their  hopes  of  re-election,  the 
public  might  rest  safe  and  contented  in  the  enjoyment  of  the 
currency,  to  which  common  benefits  they  are  entitled  and 
ought  to  enjoy. 

The  issuing  no  small  bills,  ^vouId  bring  specie  imme- 
diately into  circulation,  for  all  sums  below  the  amount  of 
paper  issued  :  while  the  perfectly  interchangeable  charac- 
ter of  the  paper,  would  put  it  on  a  par  with  gold  and  silver 
throughout  the  Union  ;  and  while  it  would  be  preferred  by 
commercial  men  for  large  business  and  remittances,  gold 
and  silver  would  be  gladly  received  by  men  in  small  busi- 
ness. 

All  the  small  channels  of  currency  would  be  filled  with 
the  precious  metals.  Every  class  of  community  would 
have  the  use  of  the  material  tor  money,  which  they  choose 
from  the  preference  of  the  other  classes  of  society,  for  that 
material  least  desirable  to  themselves. 

Removing  the  necessity  for  legislative  interference  with 
the  banks,  either  to  increase  their  capitals  or  extend  their 
privileges,  by  organizing  the  j^eople  to  regulate  the  curren- 
cy, as  before  recommended,  Avill  check  the  dangerous  and 
improper  political  influence  and  interference  of  chartered 
banks  with  elections. 

And  as  to  there  not  being  specie  enough  in  the  United 
States  to  form  a  basis  for  the  circulation  of  large  bills,  suf^ 
ficient  to  do  the  actual  husi?iess  j^ciper  of  the  country,  such 
apprehensions  are  groundless,  and  those  who  have  believed 
that  we  were  indebted  to  chartered  banks  for  all  the  money 
we  have  in  circulation,  may  be  a  little  surprised  to  learn, 
that,  for  the  last  six  years — during  the  greatest  fluctuations 
of  the  currenc}' — in  times  of  unbounded  prosperity,  as 
well  as  of  the  greatest  oppressive  financial  contractions  of 


DUNCOMBE  3  FREE  BANKING.  ISl 

the  currency — during  suspensions  of  specie  payments,  and 
consecutive  suspensions  of  business,  from  Maine  to  Geor- 
gia— there  never  has  been,  at  any  one  time,  not  even  for 
one  day,  as  much  bank  paper  in  circulation  among  the  peo- 
ple, as  the  amount  of  specie,  proved  by  the  oaths  of  bank 
officers,  to  have  been  in  the  vaults  of  the  banks  at  the  periods 
stated.  This  fact  at  first  appears  a  little  startling  ;  but  it  is 
no  more  strange  than  true,  that  there  has  not  been,  for  six 
years  past,  as  much  bank  paper  in  circulation  in  the  United 
States,  independent  of  the  deposites  in  the  banks,  as  there 
has  been  specie  actually  in  the  banks  at  the  time.  The 
question  then  arises,  how  can  this  be  true,  and  money  con- 
tinue so  scarce,  unless  there  is  something  radically  wrong 
in  the  elementary  principles  of  the  banking  system  ? 

The  leading  object  of  this  work  is,  to  illustrate  principles 
upon  which  paper  may  be  issued,  to  meet  the  deficiency  of 
the  precious  metals,  occasioned  by  the  exportation  of  spe- 
cie, that  will  be  invariably  interchangeable  for  gold  and 
silver,  current  throughout  the  Union,  as  easily  to  be  ob- 
tained as  other  commodities. 

By  centralizing  the  government  of  the  currency,  and  di- 
viding its  administration ;  separating  the  bank  of  issue 
from  the  banks  of  discount ;  limiting  the  discounts  to  not 
more  than  three  times  the  amount  of  specie  in  the  vaults  of 
the  bank  at  the  time  of  the  discount,  and  to  only  actual  bu- 
siness paper,  having  but  short  periods  to  run,  in  which  no 
director  has  any  interest ;  separating  currency  from  the  in- 
fluence of  private  interest,  credit,  or"  politics  ;  issuing  no 
small  bills,  that  men  of  small  business  may  have  gold  and 
silver,  and  the  commercial  community  large  bills,  from  the 
choice  that  each  would  have  for  the  kind  of  currency  least 
desirable  to  the  other ;  rendering  it  republican,  by  giving 
the  people  the  election  of  the  directors  of  the  currency,  as 


182  duncombe's  free  banking. 

they  elect  the  most  numerous  branches  of  their  legislatures, 
MUST,  from  the  nature  of  the  immutable  laws  of  supply 
and  demand,  and  of  cause  and  effect,  give  us  a  currency 
always  convertible,  uniformly  current  throughout  the  Un- 
ion, and,  with  proper  modifications  of  the  bankrupt  and 
usury  laws,  as  easily  to  be  obtained  as  any  other  commodi- 
ty. Currency  would  then  become  the  firmest,  as  it  is  the 
most  natural,  bond  of  union  between  the  people  and  the 
government  of  their  choice. 


CHAPTER  XXXIII. 

A  CHARTERED  UNITED  STATES  BANK  AND  BRANCHES. 

Its  benefits — how  obtained.    Its  evils — how  avoided. 

A  chartered  United  States  Bank,  with  branches,  possess 
decided  advantages  over  the  present  state  chartered  6anks, 
in  a  financial  point  of  view,  in  various  ways ;  but  whether 
these  benefits  are  not  more  than  counterbalanced,  by  the  nu- 
merous evils  that  accompany  them,  remains  to  be  investiga- 
ted. 

A  chartered  United  States  Bank,  with  branches  located 
conveniently  throughout  the  Union,  for  the  accommodation 
of  the  business  of  the  country,  if  confined  to  the  legitimate 
business  of  banking,  (that  of  lending  money,  by  discount- 
ing only  actual  business  paper,  having  but  short  periods  to 
run,)  w^ould  undoubtedly  possess  great  and  important  ad- 
vantages, in  the  monetary  affairs  of  the  country,  over  the 
present  local,  state  chartered  banks,  by  rendering  bank 
notes  equally  current  in  every  part  of  the  United  States ; 
and  thereby  lessening  the  enormous  expense  of  making  re- 
mittances from  one  part  of  the  Union  to  another,  and  re- 
moving the  inconvenience  of  defraying  travelling  expenses. 


DUNt'OMIlE  S  FREE  BANKING. 

It  would  also  do  much  toward  equalizing  the  quantity,  as 
well  as  quality,  of  the  circulating  medium  throughout  the 
Union — and  of  giving  a  more  uniform  value  to  merchan- 
dise, and  other  commodities  of  importation  and  exportation; 
while  its  notes,  from  their  extended  credit,  would  require 
less  specie  deposited  171  the  bank  as  a  basis  for  their  issue — 
both  on  account  of  their  having  nothing  to  fear  from  the 
hostility  of  neighboring  rival  banking  institutions,  which 
would  not  exist ;  or  from  any  demand  for  specie  for  expor- 
tation, as  the  bankers  (if  they  chose,)  could  guard  against 
over-issues,  and  thereby  prevent  the  surcharging  of  the 
channels  of  circulation,  without  which  there  ■svould  be  but 
little  to  be  apprehended  from  demands  of  specie  for  expor- 
tation. This  would  also  release  a  large  amount  of  specie 
from  banking,  to  be  profitably  employed  in  commerce. 

The  centralization  of  the  government  of  the  currency  in 
the  proposed  plan,  gives  the  directors  of  the  United  States 
bank,  the  bank  of  issue,  the  sale  of  the  whole  of  the  bank 
stock,  the  apportionment  between  the  several  states  of  the 
specie  received  therefor,  and  the  bills  intended  to  circulate 
as  money ;  the  preparing  such  bills  for  circulation  ;  the 
right  of  reserving  a  safety  fund  from  the  profits  of  the  bank, 
to  meet,  temporarily,  any  contingencies  of  a  local  bank,  by 
which  it  might  be  unable,  promptly,  to  redeem  its  notes  in 
specie  at  the  instant  of  the  demand.  Also  the  equalizino-, 
g,nd  declaring  the  dividends  of  the  banks,  and  thus  remo- 
ving the  spirit  of  interested  rivalry  between  the  banks  of 
discount;  the  power  to  cause  the  publishing  of  regular,  full 
and  lucid  bank  statements,  at  stated  periods  ;  and  forms  for 
the  banks  of  discount  to  fill  up,  of  their  monthly  published 
statements  and  reports,  that  they  may  be  made  uniform  ; 
with  also  as  perfect  a  control  of  the  government  of  the  cur- 
rency, (without  interfering  with  th^  administrq-tion   pf  the 


184  DUNC03IBE*S  FREE  BANKING. 

local  banks,  the  banks  of  discount,)  as  an  United  States 
bank  and  branches  could  have.  This  would  render  the  pa- 
per portion  of  the  currency  always  strictly  interchangeable 
for  gold  and  silver,  equally  current  throughout  the  Union, 
and  free  from  the  influence  of  private  interest,  credit  or  pol- 
itics ;  securing  the  bill-holder  from  a  depreciation  in  the 
value  of  their  bills,  and  the  public  from  the  dangers  of  ex- 
cessive over-expansions  of  the  currency,  and  the  ruinous 
effects  of  its  consecutive  contractions,  or  of  suspensions  by 
the  banks,  of  specie  payments,  with  their  destructive  influ- 
ences upon  manufactures,  agriculture  and  commerce.  Thus 
giving  the  public  all  the  advantages  of  an  United  States 
bank  and  branches  without  any  of  its  dangerous  financial  or 
political  effects  or  influences. 

The  evils  to  be  apprehended  from  an  United  States  bank 
and  branches,  are  principally  of  two  kinds,  financial  and 
political.  Its  financial  evils  spring  principally  from  the 
concentration  and  monopoly  of  such  an  immense  monetary 
power  in  the  hands  of  a  few  men,  for  their  own  exclusive 
benefit ;  men  who  have  a  distinct  and  separate  interest  in 
the  business  and  conduct  of  the  bank,  from  that  of  the  great 
body  of  the  people,  and  who  are  not  dependant  upon  the 
people  for  their  election  or  continuance  in  oflice,  or  for  their 
salaries  ;  but  whose  business,  by  the  laws  of  their  situation, 
is  to  make  as  much  money  out  of  the  people  as  they  legally 
can.  To  accomplish  this,  they  loan  their  money  in  large 
guras  to  foreign  speculators,  to  the  almost  entire  exclusion 
from  their  favors  of  the  regular  traders,  manufacturers, 
and  business  men  of  the  place.  They  discount  the  fictitious 
notes  of  speculators  in  preference  to  the  regular  business 
notes  of  their  customers,  because  the  speculators  will  pay  a 
higher  price  for  bank  credit,  than  the  business  men  of  the 
place,  are  willing  to  give— which  they  can  well  afford  to  do, 


buncombe's  free  BANKTNGf.  185 

by  paying  their  loans  in  places  to  which  they  export  their 
purchased  products,  or  by  other  means — since  they  thus  mo- 
nopolize the  money  of  the  place,  which  enables  them  to  con- 
trol the  business,  and  regulate  the  prices  of  the  commodi- 
ties in  which  they  deal,  as  well  as  the  exchanges  between 
the  different  places  in  the  United  States,  and  between  the 
U.  States  and  foreign  countries.  By  this  operation,  the  pro- 
ducers— the  farmers,  the  mechanics  and  manufacturers — 
receive  less  value  for  their  labor,  their  grown  or  manufac- 
tured articles  of  sale  and  exportation,  than  they  would  have 
received  from  the  regular  dealers  of  the  place,  had  the  mon- 
ey and  business  been  left  free  to  their  re g-ular  competition  ; 
but  which  they  were  precluded  from,  by  the  speculators 
monopolizing  the  whole  of  the  money. 

From  a  similar  cause,  consumers  have  to  pay  more  for 
the  necessaries  of  life  than  they  otherwise  would  have  to 
do,  while  bankers  and  brokers  are  thus  enabled  to  live 
sumptuously  by  their  legal  chartered  privileges,  upon  pub- 
lic gullibility. 

The  political  evils  of  a  chartered  United  States  bank  and 
branches,  grow,  in  a  great  measure,  out  of  the  same  causes 
that  produce  its  financial  evils.  Among  the  most  promi- 
nent of  which,  is,  that  of  the  centralization  of  the  adminis- 
tration and  concentration  of  action  of  such  an  immense  mon- 
etary power  as  the  whole  of  the  money  of  the  country  must 
possess  in  the  hands  of  a  few  individuals,  who  are  in  no 
way  responsible  to  the  people  for  their  conduct ;  but  whose 
interest  is  directly  opposed  to  that  of  the  other  inhabitants, 
while  they  are  dependant  upon  succeeding  legislatures,  for 
a  renewal  of  their  charters,  a  continuance  of  their  powers, 
or  an  extension  of  their  privileges,  which  connects  their  in- 
terests more  or  less  with  the  pohtical  parties  of  the  day, 
and  which,  at  general  elections,  materially  increases  politi- 


186  duxcombe's  free  banking. 

cal  excitement,  and  violent  party  feelings.  The  bank  hav- 
ing all  the  money  of  the  country  at  its  disposal,  as  well  as 
most  of  the  credit  and  business  capital  under  its  control,  it 
must  regulate  the  elections,  to  suit  its  own  interests. 

One  old  maxim  is,  that  **  necessity  knows  no  bounds  ;" 
another,  that  "  the  borrower  is  the  slave  to  the  lender/'  If 
these  maxims  be  true,  how  can  we  expect  to  see  political 
independence  in  men  who  are  in  debt  and  in  distress  ] 
Their  private  interest  in  the  continuance  of  their  existence, 
which  seems  dependant  upon  credit  bank  paper,  must  in- 
duce them  to  support  the  plenty-of-money  party,  without 
inquiring  or  even  caring  for  the  political  ability  of  the  can- 
didate honorably  to  discharge  the  duties  of  the  office  to 
which  they  are  about  to  elect  him. 

Nor  can  we  expect  it  to  be  otherwise,  while  credit,  cur- 
rency and  politics,  are  thus  blended  together,  by  the  neces- 
sity for  frequent  legislation  upon  the  subjects  of  banks  and 
currency. 

By  what  means,  short  of  the  immediate  interposition 
of  Divine  Providence,  could  such  a  bank  party  ever  be  de- 
feated at  an  election  of  our  Chief  Magistrate,  while  they 
can  command  the  votes  of  their  debtors  and  dependants. 

In  a  credit  country  like  ours,  next  to  the  question,  "  what 
is  to  be  made  by  this  operation]"  is,  "  how  long  a  credit 
can  be  had  V*  followed  by  "  what  must  be  the  security  V 
If  these  questions  are  answered  favorably  for  the  purcha- 
ser, the  bargain  is  concluded.  The  price,  quality,  and  mar- 
ketableness  of  the  article,  are  often  considerations  of  ap- 
parently minor  importance.  And  much  of  this  practice  has 
grown  out  of  the  abuse  of  bank  credits.  Hence  the  im- 
portance of  a  sound,  uniform  currency — unconnected  with 
politics  or  credit,  and  uninfluenced  by  private  interest,  to 
the  freedom  of  elections,  or  to  the  election  of  just  and  en- 


buncombe's  free  banking.  187 

lightened  representatives,  or  to  an  independent  legislation. 

A  suborned  press,  and  a  bribed  and  dependant  legisla- 
ture, are  only  fit  guides  for  a  weak  or  corrupt  people. 
They  are  the  stepping  stones  by  which  an  aristocracy  of 
wealth,  or  of  credit,  and  a  government  for  the  benefit  of 
the  few  at  the  cost  of  the  many,  ascend  the  throne.  Orders 
and  distinctions  of  classes,  among  the  people,  are  thus 
easily  formed.  And,  although  they  may  not  at  once  pre- 
sent us  with  kings,  lords,  and  commons — church  and  state 
dignitaries — ^naval  and  military  subjugations — these  must 
assuredly  follow  in  the  train,  or  the  people  must  rise  in  their 
might  and  disenthral  themselves  from  the  financial  and  po- 
itical  trammels  of  chartered  bank  paper,  with  its  paper  ar- 
istocracy. 

For  all  these  evils,  the  people  have  a  certain,  safe,  and 
effectual  remedy,  in  the  management  of  the  currency  them- 
selves. They  are  competent  to  elect  the  directors  of  their 
political  machinery,  to  select  the  church  in  which  they  are 
to  worship,  and  to  employ  their  religious  instructors  and 
teachers  ;  to  choose  oflBcers  of  their  schools  and  colleges, 
as  well  as  to  elect  the  administrators  of  their  townships  and 
municipalities.  Then  how  is  it  possible  they  dare  not  trust 
themselves  with  the  regulation  and  conduct  of  their  banks'? 
Certainly  the  regulation  of  the  paper  portion  of  the  curren- 
cy cannot  be  beneath  their  notice,  while  the  regulation  of  its 
metalic  portion  is,  by  the  Constitution,  restricted  to  the 
operation  of  congress  alone. 

The  remedy  consists,  in  dividing  the  administration  of 
the  currency,  by  giving  the  people  the  election  of  the  direc- 
tors, and  by  separating  the  banks  of  issue  from  the  banks 
of  deposite. 

The  election  of  the  directors  of  the  banks  of  discount, 
by  the  people  interested  in  its  loans,  will  give  them  the 


188  duncombe's  free  banking. 

same  control  of  the  currency  that  they  have  of  the  other 
elementary  principles  of  the  government ;  the  directors 
being  prohibited  from  discounting  paper,  in  which  a  direc- 
tor is  interested. 

The  history  of  the  late  United  States  bank,  and  the  man- 
ner in  which  it  bought  and  sold  bills  of  exchange,  to  pro- 
mote its  own  interests  ;  and  the  history  of  the  Philadelphia 
United  States  bank,  with  its  speculations  in  cotton,  its  at- 
tempt at  the  regulation  of  the  currency  and  exchanges,  do- 
mestic and  foreign,  are  all  too  fresh  in  the  memories  of  the 
business  public  to  require  to  be  detailed  here.  But,  as  I 
am  writing  principally  for  the  youth  of  these  United  States, 
who  may  not  recollect  this  part  of  the  history  of  our  finan- 
ces, it  may  not  be  amiss  briefly  to  refer  to  their  records  ; 
especially  as  they  hear  from  fame,  with  her  thousand 
tongues,  that  the  United  States  bank  and  branches  furnish- 
ed a  convenient  currency — that  her  bills  would  pass  current- 
ly throughout  the  Union — without  being  told  what  sums 
she  abstracted  from  the  pockets  of  commercial  men,  by  her 
bold  measures  and  powerful  influence  upon  domestic  and 
foreign  commerce,  through  her  interference  in  commercial 
speculations,  and  by  her  intermmeddling  with  the  ex- 
changes. 

We  all  feel  the  necessity  of  a  circulating  medium,  uni- 
formly current  throughout  the  Union  j  and  many  among  us 
feel  this  necessity  so  great,  that  they  would  be  willing  to 
risk  the  consequences  of  a  chartered  United  States  bank, 
with  all  its  dangerous  financial  and  political  effects,  present 
and  future,  for  the  sake  of  this  one  good.  The  aged  and 
experienced  upon  matters  of  currency  and  banking,  who 
have  not  been  blinded  by  their  own  interests,  will  not  readi- 
ly be  again  ensnared  in  charters  to  companies  of  individuals 
for  banking  purposes,  but  young  men,  you  may  be  again  en- 


duncombe's  free  banking.  189 

snared  as  we  have  been.  Have  patience  with  me,  my 
young  friends,  and  in  my  plain  homely  way,  I  will  show 
you,  how  you  may  have  a  currency  still  Tnoi'e  perfectly  cur- 
rent throughout  the  Union  without  a  chartered  bank,  and 
that  too,  without  the  possibility  of  its  interfering  with  the 
exchanges,  commerce  or  politics  ;  which,  from  the  laws  of 
its  situation,  a  chartered  United  States  bank  and  branches 
inevitably  must  do.  Self-interest  being  their  motive  power, 
they  must  make  all  the  money  tliey  legally  can.  "Well,  we 
admit,  that  the  U.  States  bank  and  branches  did  make  the 
currency  of  the  country  much  more  equal  and  convenient, 
and  lessen  the  cost  of  bills  of  exchange  between  the  differ- 
ent parts  of  the  country  below  what  they  are  under  the 
management  of  the  present  state  chartered  banks.  But 
was  that  the  best  paper  medial  commodity  that  could  be 
obtained  %  Were  not  its  financial  and  political  evils  greater 
than  its  benefits  % 

In  that  institution,  as  in  all  state  chartered  banks,  private 
interest  was  a  leading  feature  that  stamped  all  its  tran- 
sactions :  domestic  and  foreign  commerce,  and  inland  and 
foreign  exchanges,  were  made  tributary  to  its  interests. 
The  United  States  bank,  with  its  branches,  was  nearly  the 
first  bank  that  dealt  much  in  exchanges,  particularly  in  in- 
land bills.  It  at  first  commenced  dealino:  in  exchansfes 
sparingly,  as  if  conscious  of  the  impropriety  ;  but,  finding 
the  public  complaints  less  than  the  increased  profits,  it  ulti- 
mately monopolized  the  business  of  exchanges — buying 
and  selling  bills  upon  points  where  its  branches  were  loca- 
ted, and  fixing  the  rates  of  domestic  exchanges  to  suit  its 
own  interests,  and  dealing  in  foreign  exchanges  and  com- 
mercial transactions. 

Previously  to  the  incorporation  of  the  last  United  States 
bank,  the  business  of  buying  and  selling  bills  of  exchange 
Q 


190  duncombe's  free  banking. 

between  different  cities  and  states,  had  been  left,  as  it  ever 
ought  to  be  left,  to  individual  competition.  This  establish- 
ed the  market  price  of  bills  of  exchange  throughout  the 
Union,  as  it  is  established  throughout  the  commercial  world, 
and  as  it  must  invariably  be  conducted  whenever  it  is  not 
interfered  with  by  legally  constituted  monopolies.  Up  to 
that  period,  banks  had  generally  confined  their  operations  to 
lending  money,  or  lending  credit:  generally  to  the  latter 
business  in  the  United  States.  It  should  ever  be  remem- 
bered, that  banks  of  circulation  lend  credit ;  while  the  prop- 
er business  of  a  bank  of  discount  is  to  lend  money.  Nei- 
ther of  these  have,  of  rights  any  exclusive  privilege  over 
exchanges,  nor  should  they  have  the  power  to  interfere 
with  inland  bills  ;  yet  such  was  the  course  adopted  by  the 
United  States  bank,  and  since  followed  by  state  chartered 
banks  to  the  great  prejudice  of  the  currency  and  detriment 
of  commerce.  The  United  Slates  bank,  however,  posses- 
sed this  decided  advantage  over  state  chartered  bank^ — 
that,  having  branches  in  ev^ery  part  of  the  Union,  it  avoided 
the  expense  of  maintaining  agents  to  transact  its  business  at 
the  points  where  its  drafts  were  made  payable,  and  it  had 
no  necessity  for  increased  funds  to  meet  demands  at  such 
points,  as  it  chose  to  make  its  .drafts  payable  at,  as  its  own 
branches  furnished  all  that  was  required.  The  evils  of  this 
operation  upon  currency  consisted  in  part  in  a  bank  tax 
upon  all  bills  of  exchange,  and  a  flush  of  money,  followed 
by  a  corresponding  scarcity,  whenever  the  interests  of  the 
bank  required  it.  Currency  should  always  be  perfectly 
free,  and  convenient  for  every  one  to  use  at  will,  and  trans- 
mitted with  as  little  cost  from  one  part  of  the  country  to 
another  as  possible  ;  for  every  shilling  that  is  unfairly  col- 
lected on  exchanges,  is  not  only  just  so  much  loss  to  the  in- 
dividual,  but  also  to   the   public.      The  consumer  has  it  to 


buncombe's  free  banking.  191 

pay.  If  it  goes  into  the  wrong  pockets,  into  the  hands  of 
those  who  have  no  right  to  it,  the  public  are  the  loosers. 

The  practice  of  banks  of  dealing  in  exchanges,  appears  to 
facilitate  commercial  transactions  :  and,  to  a  superficial  ob- 
server, would  not  be  thought  capable  of  any  injurious  ef- 
fects upon  commerce  or  currency,  either  public  or  private  ; 
as  the  public  have  no  interest  in  common  with  the  person 
from  whom  they  purchase  their  bills.  Their  only  enqui- 
ries respect  the  certainty  of  the  payment  of  the  bills  upon 
their  maturity,  and  the  rate  of  exchange  they  have  to  pay 
for  them. 

The  public  appear  to  forget,  that  the  bank,  by  withhold- 
ing its  discounts  for  a  few  days,  when  and  wherever  they 
wish  to  purchase  bills,  may  produce  a  temporary  scarcity 
of  money,  and  thereby  lessen  their  price,  perhaps  one  or 
two  per  cent.,  to  promote  the  private  interest  of  the  bank. 
This  private  or  individual  exchange  dealers  could  not  do, 
as  they  have  only  a  given  amount  at  any  place  where  they 
may  wish  to  draw  bills  upon  ;  hence*  they  cannot  expand 
the  currency,  by  liberal  discounts,  when  they  wish  to  sell, 
and  contract  them  again  when  they  wish  to  buy.  This 
practice  of  the  United  States  bank  and  branches,  may  be 
very  profitable  to  the  stockholders  ;  but  just  as  much  as  it 
puts  into  their  pockets,  it  takes  from  the  pockets  of  the  fair 
trader  and  regular  business  men.  Suppose  then,  the  cur- 
rency of  the  country  conducted  by  one  general  chartered 
United  States  bank,  located  at  New  Orleans,  with  branches 
in  Cincinnati,  New  York,  and  other  large  cities.  At  one 
season  of  the  year  remittances  are  uniformly  made  from 
New  York  to  New  Orleans ;  at  another  season  of  the  year 
remittances  are  mostly  made  from  New  Orleans  to  New 
York.  How  easy  would  it  be  for  the  mother  bank,  at  New 
Orleans,  to  expand  its  currency  at  the  time  that  remittan^ 


192  buncombe's  free  banking. 

ces  were  to  be  made  from  that  city  to  New  York,  and  ad- 
vance the  price  of  exchanges  and  to  contract  them  again  at 
the  times  when  they  expect  to  buy  exchanges.  The  same 
thing  may  be  done  at  New  York  by  the  branch  at  that  place, 
and  in  fact  by  any  of  the  branches  throughout  the  Union. 

They  have  only  to  expand  the  currency  at  the  time  and 
place  where  they  wish  to  sell,  and  to  contract  their  dis- 
counts when  they  wish  to  buy  exchanges.  All  this  may 
be  done  without  materially  increasing  the  amount  of  the 
business  of  the  bank,  or  augmenting  the  amount  gf  the  cir- 
culating medium  :  the  bank  contracting  at  one  place  while 
she  expands  at  the  other,  and  vice  versa.  Thus  remitters 
have  uniformly  higher  prices  to  pay  for  exchanges,  than  they 
would  be  charged,  if  the  business  of  exchanges  was  left  to 
individual  competition.  The  dealers  in  exchanges  have 
been  literally  driven  from  the  market,  by  the  superior  facili- 
ties for  the  business,  of  the  old  United  States  bank,  with 
her  large  capital,  large  credit,  and  power  of  increasing  or 
lessening  the  price  of  exchanges,  by  diminishing  or  aug- 
menting the  currency  at  will. 

Whenever  a  privileged  chartered  banking  company  mo- 
nopolizes any  business,  and  by  superior  capital,  superior 
credit,  or  superior  local  advantages,  drives  the  regular  deal- 
ers in  the  business  out  of  the  market,  she  regulates  the 
price  of  buying  and  selling  the  articles  in  which  she  deals, 
and  thus  monopolizes  them  at  her  own  will.  Having  all 
the  money,  she  can  have  all  the  merchandize  at  her  own 
price.     The  public  are  uniformly  the  loosers. 

The  loaning  large  sums  to  private  speculators,  produces 
the  same  injurious  effects  upon  the  growers  and  consumers. 
The  grower  gets  less  for  his  produce,  and  the  consumer 
pays  more  for  his  necessaries.  This  is  loudly  and  justly 
complained  of  by  the  commercial  public.     But  how  much 


DUNCOMBE'S  FREE  BANKING.  193 

more  would  this  be  felt  under  the  financial  influence  of  one 
chartered  United  States  bank  and  branches  than  it  is  at 
present ;  when,  from  the  laws  of  its  situation,  the  injurious 
effect  of  bank  monopoly,  and  bank  preferences  by  a  few  in- 
dividuals, must  be  felt,  just  in  proportion  to  the  extent  of  the 
credit  paper  that  this  mammoth  paper  money-making  en- 
gine had  put  in  circulation,  and  as  it  had  acquired  public 
confidence  and  extended  its  commercial  influence.  With 
the  incorporation  of  such  a  monster,  we  may  hopelessly  bid 
farewell  to  a  sound  currency-^farewell  to  flourishing  com 
merce — farewell  to  growing  manufactures — farewell  to  re- 
publican principles,  and  the  blessings  of  equal,  civil  and  re- 
ligious liberty.  Nothing  but  the  kind  interposition  of  Heav- 
en could  save  us  from  utter  ruin. 

HOW  TO  OBTAIN  THE  BENEFITS  OF  AN  UNITED  STATES  BANK 
AND  BRANCHES,  WITHOUT  ITS  EVILS. 

Its  benefits  recapitulated — The  importance  of  a  uniform  measure  of  values — not 
produced  for  the  future  by  a  U,  S.  bank  and  branches. — On  the  U.  S.  bank's  mo- 
nopolizing powers — superiority  in  the  fund  market — desirable  stock — accumula- 
tion of  credit  only  delays  payment — or  changes  the  creditor. — Republicans  should 
avoid  long  credits,  and  the  payment  of  interest. — Elect  the^directors  of  the  banks 
by  the  people — Centralize  the  government  of  the  currency — divide  its  adminis- 
tration— render  it  republican. — Leave  the  exchanges  to  private  competition. — 
Upon  the  issue  of  small  bills. — The  material  of  least  value  circulates. — Banks  do 
not  increase  the  amount  of  money — their  circulation  is  less  than  the  specie  in 
their  vaults,  independent  of  their  deposites. — Something  radically  wrong  in  the 
elementary  principles  of  banking. — Chartered  banking — their  constiLutiouality. — 
The  competency  of  the  people  to  regulate  the  currency,  considered. — ®n  pre- 
serving the  metalic  character  of  the  currenc3^ — Instability  of  chartered  institu- 
tions considered — payment  must  be  made. — A  sound  republican  currency  produ- 
ces plenty  of  money. — The  United  States  the  first  perfect  example  of  self-govern- 
ment.— Their  currency  a  defective  principle— a  relic  of  aristocracy. — Discrepan- 
cy of  the  workings  of  the  government  machinery,  remove  this — extend  liber- 
ty and  equality. 

The  public  benefits  of  an  United  States  bank  and  branch- 
es we  have  seen  to  be,  the  producing  a  current  circulating 
medium  (or  nearly  so)  throughout  the  Union  ;  and  conse- 
quently a  present  uniform  measure  of  values,  wherever 
tills  United  States  bank  paper  formed  the  whole  currency. 
While  we  have  also  seen,  that,  although  the  'present  meas- 
ure of  all  values  is  thus  made  uniform  throughout  the  Uni' 


194  buncombe's  free  banking. 

ted  States,  yet  that  the  past  and  future  measure  of  values, 
can  by  no  means  be  relied  on  as  established  by  any  one  or 
more  chartered  banks,  owing  to  the  constant  fluctuations  of 
their  paper  currency,  and  to  tlieir  being  controlled  by  pri- 
vate interest,  by  credit  and  by  politics — as  every  over-issue 
lessens  its  value,  and  every  over-contraction  increases  it. 
The  price  of  a  days  labor  yesterday,  maybe  the  price  of 
two  day's  labor  to-day,  and  the  price  of  three  day's  labor 
tx>-morrow,  owing  to  the  uncertainty  of  bank  paper. 

The  liberal  discounts  of  the  banks,  or  the  contractions  of 
their  circulation,  which  must,  by  the  laws  of  their  situation, 
be  varied  to  meet  their  interests,  credit,  or  political  party 
requirements,  all  influence  the  value  of  money  and  of  other 
commodities,  and  leave  it  fluctuating  and  uncertain. 

The  proposed  plan  of  a  currency  is  intended  to  possess 
decided  advantages,  in  every  respect,  to  any  chartered  com- 
pany, without  the  ruinous  commercial  effects  of  the  mo- 
nopolizing of  the  currency  and  exchanges  of  an  United 
States  bank  and  branches.  It  must  declare  larger  divi- 
dends and  reserve  larger  bonuses,  than  any  other  safe  in- 
vestment of  money  in  America.  The  stock  will  be  more 
uniformly  current  and  saleable  in  the  stock  exchange  mar- 
ket, and  consequently  posses  this  great  and  important  ad- 
vantage over  most  other  stocks ;  that  it  will  be  money  in 
hand,  when  that  is  desired,  drawing  the  highest  interest 
while  it  is  retained,  and  convertible  into  other  stock,  mon- 
ey, or  commodities,  at  an  advance  in  times  of  plenty  of 
money,  and  at  but  a  slight  discount  in  the  worst  of  times  ; 
thus  it  will  become  desirable  stock  for  the  investment  of 
money.  We  have  also  seen,  that  the  accumulation  of  cred- 
it only  defers  the  pay  day ;  it  does  not  create  actual  means 
of  meeting  payments — it  only  changes  the  creditor  and  the 
credit— and  the  longer  the  payment  of  any  debt  is  deferred, 


buncombe's  free  bawkixg,  195 

and  the  more  interest  that  has  been  allowed  to  accumu- 
late, by  adding  interest  to  interest,  the  greater  must  be  the 
sacrifices  and  exertions  to  meet  the  ultimate  payment  of  the 
debt.  From  which  we  infer,  the  safest  way  for  a  republi- 
can debt-paying  people  to  do  is,  to  get  out  of  debt  as  soon 
as  possible,and  cautiously  avoid  becoming  involved  a  second 
time.  To  accomplish  this,  credit  must  be  separated  from 
currency  ;  politics  must  be  separated  from  currency  ;  pri- 
vate interest  must  be  separated  from  currency  ;  the  bank  of 
issue  must  be  separated  from  the  banks  of  discount ;  and 
currency  must  be  rendered  as  republican  as  our  other  ele- 
mentary principles  of  government,  by  leaving  it  to  the  dis- 
posal of  the  people,  through  the  election  of  directors  from 
among  themselves,  of  persons  having  the  same  common  in- 
terest with  themselves. 

The  centralization  of  the  government  of  the  currency, 
will  give  the  public  all  the  benefits  of  a  chartered  United 
States  bank  and  branches,  while  its  divided  administration 
will  prevent  its  munopoly  by  a  few  private  individuals  for 
their  own  benefit,  and  that  of  speculators.  It  will  prevent 
the  bank  from  interfering  with  exchanges,  or  with  com- 
merce ;  and  confine  its  operations  to  its  legitimate  business, 
that  of  lending  money,  by  discounting  only  actual  busmess 
paper,  having  but  short  periods  to  run. 

The  election  of  the  directors  by  the  people,  will  render 
the  paper  portion  of  the  currency  as  republican  as  the  pre- 
cious metals  ;  as  current  throughout  the  Union  as  gold  and 
silver,  for  which  it  must  be  uniformly  interchangeable  ; 
while  the  issue  of  no  small  bills  will  furnish  every  class  of 
society  with  the  material  they  prefer  for  money,  from  the 
choice  of  other  classes,  for  that  material  least  valuable  to 
themselves. 

It  is  a  fact,  not  frequently  remarked,  that  there  has  not 


196  duncombe's  free  banking. 

been,  for  ten  years  past,  upon  an  average,   more    paper 
money  passing  from  hand  to  hand,  independent  of  the  de- 
posites  in  the  banks,  than  the  actual  amount  of  specie  in  the 
vaults  of  the  banks,  upon  w^hich  this  amount  of  paper  has 
been  issued.     It  is  true  that  the  reported  amount  of  paper 
in  circulation  has  generallyexceeded  three  times  the  amount 
of  specie  in   the  vaults  of  the  banks ;  yet,  as  the  deposites 
of  the  banks  consist  principally  of  the  notes  of  other  banks, 
the  actual  circulation  of  paper  money,  after  deducting  the 
deposites,  is  less  than  the  specie  hoarded  up  in  their  vaults. 
The  bad  management  of  the  currency  by  chartered  compa- 
nies, lessens  the  actual  amount  of  circulating  medium  be- 
low the  necessities  of  the    public,  and  below  the  ablities 
of  the  specie  in  the  country  ;  compels  commercial  men  to 
pay  a  large  interest  for  bank  credit,  and  keep   on  hand  in 
deposite  a  large  amount  of  bills  ;  while   these   privileged 
bankers  enhance  or  diminish,  at  their  pleasure,  the  amount  of 
money  in  circulation,  and  the  prices  of  all  commodities,  and 
increase  the  facilities  or  difficulties  with  which  money  is  to 
be  obtained.     The  few  individuals  who  now"  have  the  man- 
agement of  the  monetary  aifairs  of  the  country,  as  directors 
of  chartered  banks,  would  not  be  less  capable  to  regulate  the 
currency  as  directors  of  the  banks,  if  they  were  elected  by 
the  people,  than  they  are  at  present  from  that  cause.    They 
are  at  this  time  considered   competent  to  control  the  issues 
and  discounts  of  the  paper  that  is  to  circulate  as  money  in 
the  place,  when  their  interest  is  directly  opposed  to  the  in- 
terest of  the  community ;    how   much   more  likely    would 
they  beto  render  general  satisfaction  to  the  public,  if  they 
were  only  interested  in  the  prosperity  of  the  place,  and  the 
metalic    character  of   the    currency  ]      Besides,   if  these 
individuals,  who  are  now  selected  from  so  small  a  por- 
tion of  the  community,  as   are   stockholders  in   chartered 


dtjncombe's  free  banking.  197 

banks,  are  found  competent  to  the  regulation  of  the  paper 
portion  of  the  currency,  would  it  not  be  reasonable  to  sup- 
pose that  from  the  whole  community,  directors  of  the  cur- 
rency could  be  found  far  more  capable,  and  far  more  desi- 
rous of  regulating  the  currency  for  the  general  prosperity 
of  the  country ;  and  of  preserving  its  metalic  character, 
and  the  equilibrium  of  the  circulation  ;  as  well  as  the  uni- 
formity of  quantity  and  consequent  absence  of  fluctuations, 
contractions  or  over-expansions,  by  which  the  measure  of 
all  values  is  rendered  indefinite  and  uncertain,  as  it  must 
ever  continue  to  be  under  the  chartered  bank  system. 
Whether  the  paper  be  issued  by  one  large  chartered  bank, 
or  by  many  small  companies,  the  effects  must  be  the  same  ; 
instability,  and  uncertainty  must  attend  it.  The  radical  de- 
fects of  the  currency  must  be  removed,  for  accumulating 
credit  upon  credit,  will  not  obviate  the  defects  of  the  cur- 
rency ;  it  extends  credit,  and  thereby  delays  the  time  of 
payment ;  but  that  is  all — payment  must  be  made  sooner  or 
later,  or  interest  must  be  added  to  interest,  accumulating 
the  debt,  and  endangering  its  ultimate  payment.  With  a 
sound  repubhcan  currency — with  money  plenty,  that  is,  as 
easily  to  be  obtained  as  other  commodities — with  domestic 
commerce  and  manufactures  encouraged,  by  the  loans  from 
the  bank  being  made  to  the  fair  traders  of  the  place,  by  dis- 
counting only  their  actual  business  paper,  having  but  short 
periods  to  run — the  true  growth  and  prosperity  of  the  com- 
munity will  be  best  promoted. 

Under  such  a  state  of  finances,  currency  and  exchanges, 
America  would  flourish  ;  her  citizens,  from  the  Atlantic 
to  the  Pacific,  would  prosper ;  and  this  continent  would 
become  one  vast  republic,  where  civil  and  religious  liberty 
would  reign  triumphant.  She  might  then  well  be  styled, 
**The  land  of  the  free,  and  the  home  of  the  brave." 


19S  duncombe's  free  banking. 

A  sound  currency  in  the  United  States  would  do  more 
toward  extending  and  establishing  freedom  throughout 
THE  WORLD,  than  the  combined  forces  of  armies  and  navies. 

The  United  States  first  showed  the  world  the  example 
of  a  great  people  governing  themselves ;  and  becoming 
prosperous  and  happy  under  their  own  institutions. 

If  the  currency  of  the  country  is  found  to  be  defective, 
from  its  containing  the  relics  of  feudal  or  monarchical  prin- 
ciples, let  that  aristocratic  tendency  be  excised ;  let  the 
grand  experiment,  commenced  with  the  establishment  of 
our  constitution,  be  here  perfected  j  let  all  the  elementary 
principles  of  our  government  be  made  perfectly  republican. 
The  present  discrepancy  of  the  workings  of  the  machine- 
ry of  the  government  will  instantly  disappear — all  the  va- 
rious parts  will  harmonize,  become  strong  and  pleasing — • 
while  they  perfect  the  peace,  prosperity  and  good  govern- 
ment of  these  United  States,  and  extend  the  blessings  of 
human  liberty  over  the  habitable  globe,  "  until  all  the  na- 
tions of  the  earth  shall  know  the  Lord,  from  the  rising  to 
the  setting  of  the  sun/* 


CHAPTER  XXXIV. 

ON  THE  EFFECTS  THAT    THE    CURRENCY  OF    A   COUNTRY  HA  S 
UPON  ITS  INDEPENDENCE. 

Currency  one  of  the  pillars  of  the  government. — Frequent  legislation  upon  the  po- 
litical machinerj'  of  the  arovernment  injurious. — Provided  ag-ainst  by  the  found- 
ers of  our  government. — Relig-ion  and  literature  made  independent  of  each  other, 
and  of  politics — in  this  also  is  seen  the  wisdom  of  our  forefathers. — The  liberty 
of  speech,  freedom  of  the  press,  social  habits,  all  free — but  currency  less  per- 
fectly free  by  practice  than  by  the  constitution. — Causes  explained — Love  of 
gain — Spirit  of  enterprise — iSectarianism  serviceable — susceptible  of  abuse — 
kept  within  proper  limits,  salutary  to  the  public  welfare. — Currency  should  be 
left  at  the  disposal  of  the  whole  people — they  require  no  new  powers — they  only 
require  organization  by  congress. 

As  has  been  before  stated,  the  currency  of  the  country 
is  one  of  the  pillars  upon  which  the  fabric   of  government 


buncombe's  free  banking.  199 

rests ;  and,  therefore,  ought  to  be  as  immutable  as  its  reli- 
gion or  its  literature.  We  have  shown  in  another  place,  that 
great  evil  would  result  from  a  constant,  or  even  frequent 
legislation,  upon  the  political  machinery  of  the  government ; 
and  that  to  prevent  the  danger  of  such  a  course  of  policy, 
the  framers  of  our  constitution  have  wisely  provided,  that 
the  form  of  government  cannot  be  altered,  or,  in  other 
words,  the  constitution  cannot  be  amended,  without  careful, 
lengthy,  and  public  consideration,  as  well  by  the  people 
themselves  as  by  their  legislature. 

The  religion  of  the  country,  too,  is  quite  independent  of 
its  politics.  Every  man  is  allowed  to  worship  God  accor- 
ding to  the  dictates  of  his  own  conscience.  He  may  pay 
one  or  more  clergymen,  or  he  may  not  pay  any  ;  he  may 
pray  or  worship  as  long,  as  loud,  and  as  often,  or  as  little 
as  he  pleases  ;  he  may  purchase  as  many  or  as  few  church 
pews  as  he  chooses;  and  whatever  he  does,  or  does  not 
do,  in  matters  of  religion — provided  he  does  not  outrage 
decency,  or  disturb  the  public  peace  of  society — cannot  be 
made  a  test  for  office,  or  a  disqualification  to  any  situation 
under  the  government,  or  within  the  elective  powers  of 
the  people :  all  this  is  happily  provided  for  by  our  inimit- 
able and  glorious  constitution. 

Our  literature,  too,  has  been  left  free  and  unrestrained  by 
legal  enactments.  Our  schools,  seminaries,  and  colleges, 
are  opened  to  all — whether  he  be  Jew  or  Gentile,  Protes- 
tant or  Catholic,  it  matters  not — the  honors  of  our  institu- 
tions are  free  to  all  who  seek  them;  although  he  be  a  citi- 
zen of  another  nation,  and  a  subject  to  a  King,  yet  repub- 
lican America  offers  him  free  access  to  our  schools,  and  equal 
competition  for  the  honors  and  degrees  that  they  confer. 
And  all  this,  too,  is  wisely  provided  forby  our  constitution, 
that  no  religious  creed  should  close  the  doors  of  our   colle- 


200  duncombe's  free  banking, 

ges  upon  such  citizens  as  were  unwilling  to  subscribe  to  the 
thirty -nine  articles  of  faith,  or  other  religious  tests. 

And  here  again  we  see  the  wisdom  of  the  framers  of  our 
government,  that  no  legislative  enactments  are  annually  re- 
quired to  entitle  the  people  to  become  educated.  Their 
social  habits,  too,  are  as  free  as  their  public  presses.  And 
this  credit  too,  is  to  be  ascribed  to  the  wisdom  of  our  ven- 
erable forefathers.  One  thing,  however,  they  could  not 
provide  against,  without  violence  to  the  spirit  of  the  consti- 
tution, and  that  was,  the  exportation  of  specie  from  the 
country.  How  ridiculous  then  to  complain  of  it.  It  is  a 
part  of  the  active  business  of  the  country,  and  should  be 
left  free,  like  water,  to  flow  where  it  tends.  The  love  of 
gain  is  of  itself  an  honorable  ambition,  (when  not  inordinate) 
to  be  above  the  wants  of  the  necessaries  of  life.  This  love 
has  led  to  noble  and  great  privations  and  sacrifices,  to  ac- 
quire a  competence — and  few  people  in  the  world  have 
shown  more  laudable  enterprise  than  the  Americans — yet, 
this  love  of  gain  leads  to  the  use  of  small  bills,  which  drives 
the  specie  out  of  circulation  ;  but,  like  sectarianism  in  reli- 
gion, by  which  much  more  religious  instruction  is  obtained 
than  would  be  secured  without  it,  it  is  susceptible  of  much 
abuse  ;  yet,  when  confined  within  true  bounds  and  proper 
limits,  it  becomes  salutary  to  the  public  welfare. 

The  currency  of  the  country  should  be  left  to  be  regu- 
lated bv  the  people.  They  require  no  new  powers  to  make 
them  quite  independent  in  finance.  All  they  require  is,  such 
an  organization  as  would  enable  them  to  exercise  the  pow- 
ers that  are  inherent  in  them,  and  constitutionally  secured, 
to  regulate  their  currency  without  the  intervention  of  the 
legislature,  or  without  the  aid  of  private  companies,  or  for- 
eio*n  or  domestic  credit.  The  currency  of  the  country 
should  be  as  free  from  either  private  interference,  or  polit- 


duncombe's  free  banking.  201 

ical  party  influence  or  credit,  as  are  the  religion,  the  poli- 
tics, or  the  literature  and  social  habits  of  the  people. 

The  hands  of  the  people  would  become  strong,  through 
the  election  of  their  financial  directors,  after  the  same  man- 
ner as  they  elect  their  political  directors.  They  would 
thus  separate  currency  from  politics. 

The  currency  of  the  country  may  also  be  divided  into 
money-currency  and  cominodity-currency.  The  money- 
currency  should  be  composed  of  the  precious  metals,  and 
paper  based  upon  the  precious  metals,  and  always  converti- 
ble into  specie  :  not  subject  to  any  contingency  or  circum- 
stance that  would  alter,  change  or  defeat  the  value  of  it,  or 
endanger  its  instant  convertibility.  The  credit-currency 
should  be  composed  of  every  species  of  convertible 
credit — bank  notes  of  incorporated  companies,  (although 
bankers  should  never  be  allowed  a  limited  responsihility,  as 
this  would  render  their  credit  imperfect,)  deposiles,  foreign 
and  domestic  exchanges,  checks,  bills,  drafts,  convertible 
merchandise,  and  commodities  of  exportation  and  of  im- 
portation. 

I  have  chosen  to  add  to  every  species  of  credit,  the  com- 
modity-currency of  the  country,  composed  of  such  goods 
as  are  certain  of  making  remittances,  at  some  price,  in  any 
market  to  which  they  may  be  shipped,  as  well  as  to  illus- 
trate what  I  mean  by  a  money-currency  and  a  commodity- 
currency,  the  better  to  enable  me  to  direct  public  attention 
to  a  system  of  mixed  specie,  3ind  paper  money  currency  t\ia.t 
shall  be  equally  and  invariably  as  convertible  as  the  pre- 
cious metals,  by  producing  so  much  paper  only  as  would 
occupy  the  channels  of  commerce,  not  supplied  with  the 
precious  metals,  that  mechanics  and  laborers  may  have  a 
metalic  currency,  and  the  merchant  and  commercial  men 
may  have  large  bills  for  commercial  purposes. 


202  BUNCOMBE  S  FREE  BANKING. 

If  any  doubt  remains  as  to  the  preference  given  by  dif- 
ferent classes  of  business  men  to  each  species  of  money  for 
a  currency,  let  them  be  enquired  of,  and  their  answers 
should  decide  the  question  of  the  currency.  If  they  sev- 
erally require  different  kinds  of  money,  why  should  not 
each  class  of  citizens  be  gratified  with  their  choice  of  their 
kind  of  currency  ]  The  whole  of  the  paper,  however, 
should  always  be  convertible  at  will  at  the  counter  where 
it  was  issued. 

In  making  the  distinction  here  laid  down,  between  the 
different  kinds  of  currency  necessary  to  the  transaction  of 
extensive  business,  I  wishnottabe  understood  as  expressing 
opinions  that  have  been  matured  by  thorough  investigation, 
and  perfected  by  experience,  bat  as  simply  advancing  ideas 
that  are  entirely  original  with  myself,  and  drawn  from  an 
examination  of  the  currencies  of  Europe  and  of  the  United 
States,  as  well  as  of  the  North  American  British  Colonies. 

The  currencies  of  every  country  have  more  influence 
over  the  people  than  standing  armies  and  navies.  Their  di- 
rect personal  interest  in  the  support  of  the  currencies  and 
finances  of  a  country  become  its  firmest  bulwarks.  This 
has  been  clearly  illustrated  in  England,  by  the  effect  of  their 
irredeemable  national  debt,  in  the  firm  support  given  to 
the  government  by  the  fund -holders. 

The  English  people  pay  annually,  in  interest  on  the  ir- 
redeemable national  debt  of  Great  Britain  of  c£800,000,- 
000  sterling,  and  in  support  of  the  civil  administration  of 
the  government,  the  army  and  the  navy,  independent  of  the 
immensely  expensive  municipalities  in  the  kingdom,  a  much 
larger  sum  than  is  collected  from  any  other  people,  with 
the  same  means,  in  Christendom.  And,  although  the  name 
of  the  immortal  Pitt,  as  associated  with  the  national  debt 
of  Great  Britain,   may  be  *'  damned  to  everlasting  fame,'* 


duncombe's  free  banking.  203 

yet  the  public  economist  cannot  avoid  admitting  what  all, 
who  trace  effects  to  their  causes,  must  see,  in  the  associa- 
tion of  private  interest  with  the  monied  interest  of  the 
kingdom,  the  operations  of  his  master  spirit ;  and  that,  if 
he  exclaimed,  when  the  thought  first  entered  his  mind, 
"  my  country  never  dies,"  that  he  clearly  saw  such  a  con- 
nection of  private  interest  between  the  government  and  the 
people  must  be  perpetual,  and  must  (as  every  day's  expe- 
rience shows,)  support  the  Throne,  Lords  and  Commons, 
in  all  their  extravagance,  when  armies  and  navies,  without 
the  aid  of  the  private  interest  of  the  citizen,  would  be  un- 
availing. In  this  light,  his  plan  of  a  national  debt,  owned 
by  the  citizens  of  the  country,  having  the  interest  paid  punc- 
tually, the  funds  themselves  being  always  saleable  in  the 
market,  like  any  other  commodity  or  public  stock,  and 
therefore,  always  convertible  through  the  government  agent, 
the  Bank  of  England,  (which  has  for  part  of  its  capital  a 
government  debt,)  into  money  at  the  pleasure  of  the  fund- 
holder. 

There  is  also  another  example  of  the  wonderful  power 
and  influence  of  money  over  the  governing  and  the  govern- 
ed. The  government  support  the  bank,  renew  its  charter, 
whether  popular  among  the  great  mass  of  people  or  not,  so 
that  it  is  desired  by  the  monied  portion  of  the  nation;  and  the 
bank,  in  turn,  loans  the  government  an  additional  sum  for 
the  privilege  of  its  charter.  The  bank  of  the  United  States, 
and  some  banks  of  sta.tes,haiYe  given  a  bonus  for  their  char- 
ters.    Oh,  what  a  mockery  of  independence  in  legislation  ! 

To  bribe  the  whole  government — Kings,  Lords  and  Com- 
mons—is no  crime  ;  while  to  bribe,  or  even  offer  a  bribe 
to  one  or  more  members  of  the  government,  is  a  capital  of- 
fence. 

Well,  to  proceed.     The  funds  being  always  convertible 


204  buncombe's  free  banking. 

at  nearly  the  same  price,  renders  them  desirable  property 
to  the  capitalist,  as  it  is  money  at  interest,  and  always  con- 
vertible at  his  pleasure  ;  and  few,  if  any,  among  the  fund- 
holders,  ever  enquire,  with  Yankee  inquisitiveness  and  cu- 
riosity, whether  this  debt,  of  which  the  English  funds  are 
composed,  ever  will  or  will  not  be  paid  off  or  redeemed. 
To  fund-holders  it  is  quite  enough,  that  their  respective 
portions  are  convertible ;  and  so  far  as  they  are  individual- 
ly concerned,  their  portion  may  be  paid  off  any  day  that 
they  desire  that  it  should  be — for  they  can  realize  the  mon- 
ey for  their  funds,  with  a  slight  increase  or  diminution,  as 
the  money  market  is  flush  and  the  country  prosperous,  or 
otherwise.  Hence,  the  wonderful  power  of  the  English 
nation.  Private  interest  is  brought  to  support  the  govern- 
ment by  means  of  heavy  duties,  imposts,  and  various  direct 
taxes,  to  furnish  the  means  of  paying  a  large  and  extremely 
expensive  army  and  navy  j  and,  by  tithes  and  taxes,  to  sun- 
port  an  extensive  church  and  state  establishment ;  and  by 
poor  rates,  to  provide  for  the  poor — which,  while  it  serves 
to  keep  the  people  in  awe  of  present  pains  and  penalties 
or  future  punishment,  it  provides  places  and  situations  for 
thousands  of  persons,  the  younger  sons  of  a  half-starved 
aristocracy,  who  would  be  unable  to  support  themselves 
without  the  aid  of  church  and  state. 

The  governing  power  of  every  country  are  always  content 
with  their  own  administration  of  the  laws ;  and  where  the 
governed  can  be  kept  poor  and  ignorant,  any  government 
will  satisfy  them,  or  if  it  does  not  satisfy  them,  they  learn, 
by  sad  experience,  that  to  complain  injures  them  instead  of 
benefitting  them — and  they  thus  remain  silent,  and  toil  on. 

And,  but  for  the  cheap  publications,  and  the  reduction  of 
the  duties  on  bread-stuffs,  ale,  and  the  coarse  and  common 
materials  used  by  the  masses  and  the    poorer   classes,  they 


duncombe's  free  banking.  205 

would  be  as  easily  governed  as  so  many  sheep  or  bullocks. 
Hence  the  question  becomes  one  of  serious  moment,  in 
England,  whether  education,  without  morality,  promotes 
or  lessens  the  happiness  of  the  people.  The  reduction  of 
taxes  upon  knowledge,  has  opened  ten  thousand  new  and 
politically  dangerous  channels  of  knowledge  to  the  com- 
mon people.  "  Knowledge  is  power"  every  where  ;  but  in 
England  that  power  is  more  rapidly  acquired  in  the  dense 
population  of  large  cities  and  towns,  and  from  the  immense 
large  manufactories,  where  reading  is  becoming  popular, 
and  where  every  man  may  drink  his  mug  of  half-taxed  ale, 
and  read  his  half-taxed  newspaper,  at  half  the  expense  of 
former  years,  and  where  their  constant  intercourse  with 
each  other,  enables  them  to  communicate  any  information 
that  interests  them  throughout  the  whole  establishment,  and 
from  one  large  establishment  to  another,  with  telegraphic 
celerity. 


CHAPTER  XXXV. 

THREAD-NEEDLE  LANE  THE  CENTRE  OF  MONIED  ATTRACTION. 

Thread-Needle  Lane,  the  Bank  of  England,  and  the  Stock  Exchange,  regulate  the 
currency  of  the  world  —The  great  credit  mart.— .The  magic  power  of  exchaor 
ges.— Self-love  the  motive  power.— Fluctuations  in  the  currency  injurious  to 
trade. 

Thread-Needle  Lane  is  the  point  of  monied  attraction  ; 
around  which  the  ^vealthy  merchants  and  bankers  of  Eu- 
rope and  of  America  assemble.  It  is  the  great  credit  mart 
of  the  world.  With  the  Bank  of  England  are  deposited 
the  revenues  of  the  British  nation,  and  the  products  of  the 
commerce  of  the  western  and  much  of  the  eastern  hemis- 
phere ;  and  from  thence  issue  credits  that  pass  currently 
throughout  the  continents  of  Europe  and  America,  in  bilk 


206  duncombe's  free  ba>king, 

of  exchange  and  drafts,  as  the  precious  metals  do  in  other 
countries. 

On  looking"  at  this  immense  operation  of  credit,  we  are 
led  to  enquire,  by  what  strange  magic  is  this  wonderful  ma- 
chinery moved — exercising  its  influence  among  political 
friends  and  foes  alike  ?  The  enchanting  power  of  money, 
and  of  private  interest,  operates  like  a  charm  upon  every 
man,  woman  and  child,  throughout  the  universe; — and  in 
this  is  found  all  the  wonderful  secret  that  so  much  astonish- 
es mankind. 

Self-love  has  found  a  pander  in  the  credit  system  ;  and 
in  that  joy,  all  patriotism,  distinctioi:i  of  country,  religion, 
sect  or  party,  are  swallowed  up  and  forgotten. 

The  stocks  of  the  old  and  new  world  are  priced,  and  the 
exchanges  with  each  regulated  according  to  the  amount  of 
exports  and  imports,  that  the  one  requires  of,  or  can  sup- 
ply, of  the  other.  At  this  point,  then,  the  great  credit  cur- 
rency of  the  world  is  brought  to  be  weighed,  valued  and 
balanced.  Here  each  trader  receives  his  wages,  whether 
it  be  much,  or  whether  it  be  little,  and  returns  to  his  native 
land  to  replenish  his  stores,  and  again  to  visit  this  centre  of 
monled  attraction,  and  enrich  himself  by  these  exchanges. 
If  he  resides  on  the  western  continent,  or  in  the  United 
States,  he  returns  to  a  western  exchange,  say  New  York, 
and  here  he  finds  proper  food  for  his  avarice  and  ambition — 
the  various  American  stocks  and  exports  of  the  north  and 
south  are  all  before  him.  One  thing  only  gives  him  vexation : 
the  currency  of  the  country  changes  witli  the  credit  of  the 
country ;  and  what  he  left,  on  his  leaving  America,  as  a 
sound  currency,  he  now  finds  either  doubtful,  or  perhaps, 
swept  away  by  the  influence  of  some  counter-current  in 
trade  or  credit,  that  he  had  not  foreseen  or  anticipated,  and 
he  readily  concludes,  that  the  money-currency — that  cur- 


buncombe's  free  banking.  207 

rency  by  which  every  other  material  is  valued — should  be 
uniform,  and  invariably  the  same.  This  is  found  to  be  the 
case  with  the  precious  metals,  and  he  wonders  why  conver- 
tible paper-money  should  not  be  equally  uniform  in  its  value, 
and  equally  as  easily  obtained  at  one  time  as  at  another. 


CHAPTER  XXXVI. 

TO  RENDER  THE  PAPER  PORTION  OF  THE  CURRENCY  AS  STA- 
BLE AS  GOLD  AND  SILVER. 

Separate  currency  from  credit,  and  from  private  interest— Limit  its  issues  to  the 
amount  of  its  bills — to  the  amount  of  its  specie  basis — to  the  actual  demand  fi)r 
the  discount  of  business  paper. — Separate  issues  from  discounts. — Allow  the  free 
exportation  of  specie,  to  check  over-trading. — Without  over-issues  no  fear  of 
contractions. — Careful  supervision — frequently  published  reports — check  exces- 
ses.— Elect  directors — preclude  them  from  teiuptatiou  to  over  issues. — If  the  bills 
apportioned  to  a  bank  are  not  equal  to  the  specie — loan  specie,  if  necessary,  to 
meet  the  actual  demand  for  currency. — Issue  no  small  bills — their  injurious  ef- 
fects.— In  En^rland,  with  the  issue  of  one  pound  notes,  the  specie  disappeared,  as 
if  by  majjic. — The  precious  metals  preferred  by  a  majority  of  the  producers. — 
Disadvantriges  of  uncurrent  money — from  six  to  ten  percent,  tax  paid  in  pros- 
perous times  for  a  paper  currency. — Producers  and  consumers  support  all  the 
bankers,  brokers  and  idlers — who  live  upon  the  depreciation  of  the  currency,  or 
by  the  circulation  of  uncurrent  notes. 

To  render  the  paper  portion  of  the  currency  as  stable, 
and  immutable  as  gold  and  silver,  vioney -currency  must  be 
separated  from  the  credit-currency^  which  is  controlled  by 
private  interest.  Restrict  the  issues  of  paper,  to  circulate 
as  money,  to  the  actual  demand.  This  may  be  done  in  two 
ways  ;  firstly,  limit  the  quantity  to  be  issued  in  each  state  by 
directors,  whose  business  it  shall  be  to  understand  the  mon- 
ey trade  of  the  world,  and  who  can  have  no  private  interest 
to  blind  their  eyes,  or  mislead  their  judgments,  whereby, 
they  being  placed  above  suspicion,  may  calmly  consider  the 
demand,  and  order  a  supply  to  meet  it.  But  again,  should 
this  demand  be  more  than  a  metalic  basis  could  be  found  to 
justify,  that  demand  should  be  lessened,  by  lessening  our 
imports.     This  would  again  produce  a  salutary  check  upon 


208  duncombe's  free  banking. 

over-issues ;  for,  be  it  remembered,   that  without  over-is- 
sues, there  is  nothing  to  be  feared  from  over-contractions. 

The  United  States  bank  directors  should  never  discount 
paper,  put  bills  in  circulation,  receive  deposites,  or  in  any 
way  exercise  any  power  over  the  credit  of  the  currency  in 
its  local  circulation,  farther  than  by  apportioning  to  each 
state  the  amount,  beyond  which  they  cannot  exceed  their 
issues  ;  and  to  take  a  general  supervision,  and  publish  the 
reports  of  the  several  state  institutions  quarterly,  or  oftener 
if  necessary. 

The  several  state  institutions,  in  turn,  would  apportion, 
according  to  the  demand,  the  amount  intended  to  be  circu- 
lated in  their  state,  between  the  local  banks,  or  banks  of  is- 
sue, of  their  state  ;  take  a  general  supervision  of  the  branch- 
es, and  publish  their  monthly  reports  :  as  well  as  furnish 
the  general  bank  with  regular  quarterly  statements  of  the 
business  of  the  several  banks  of  issue,  in  their  state  ;  while 
the  banks  of  issue  would  be  restricted  to  three  times  the 
amount  of  specie  actually  in  their  vaults  at  the  time  of  the 
issue.  If  specie  accumulated  in  their  vaults,  beyond  the 
amount  of  bills  given  them  to  circulate,  they  would  not  ne- 
cessarily suffer  from  the  loss  of  the  use  of  the  specie,  as 
they  could  loan  it  as  any  private  individuals  might  do. 

By  issuing  no  bills  of  smaller  denominations  than  circu- 
late in  England,  the  general  or  universal  credit-currency 
would  not  be  impaired,  and  the  precious  metals  would  oc- 
cupy similar  channels  of  commerce  on  both  sides  of  the 
ocean.  Small  bills  are  that  portion  of  the  paper  money, 
that  supplants  the  precious  metals  in  any  country.  And 
we  have  the  exj^erience  of  France  and  England,  and  re- 
peated experiments  with  small  bills  in  the  United  States, 
against  their  circulation — and  only  one  argument  in  their 
favor,  that  of  convenience,  growing  out  of  the  parsimony 


duncombe's  free  banking.  209 

and  private  interest  of  incorporated  companies  in  this 
country. 

In  England,  during  the  circulation  of  their  *'  one  pound 
notes,"  the  precious  nnetals  disappeared.  And  upon  the 
calling  in  of  all  the  one  pound  notes  in  England,  a  slight 
inconvenience  was  experienced  ;  but  this  was  but  tempo- 
rary, and  soon  yielded  to  the  far  more  healthy  state  of  the 
currency,  in  which  five  pound  notes  are  the  smallest  paper 
money-currency  that  circulate  in  that  country. 

In  France,  their  ablest  financiers  have  never  yet  been 
able  to  discover,  under  any  emergency,  any  advantage  to 
be  derived  from  giving  the  people  a  credit  paper-currency, 
that  they  might  not  be  satisfied  with,  under  any  little  politi- 
cal discontent  or  financial  derangement.  And  how  discern- 
ing Americans  can  find  profit  in  using  the  credit  of  private 
companies,  in  lieu  of  their  own  legal  metalic  currency,  is 
more  than  I  can  comprehend,  if  such  is  the  fact ;  but  I  have 
yet  to  be  convinced,  that  the  mechanics  and  laborefs  are 
desirous  of  having  paper  money  supply  the  place  of  the 
precious  metals  for  small  sums. 

If  they  could  realize  the  daily  loss  they  sustain  in  the  do- 
mestic market,  by  having  small  bills  to  change  instead  of  sil- 
ver dollars,  the  loss  from  fire,  from  accidents,  and  from  coun- 
terfeits, as  well  as  from  uncurrent  money,  I  am  convinced, 
not  one  out  of  one  hundred  would  be  willing  to  pay  six  per 
cent,  to  the  banker  for  paper  money,  that  costs  him  six  per 
cent,  more  to  circulate  it  after  he  has  it.  His  only  source 
of  consolation  for  this  loss  is ;  firstly,  that  he  does  not  pay 
the  six  per  cent,  for  the  use  of  the  paper  to  the  bank,  that 
being  paid  by  the  borrower ;  and  that,  if  we  had  no  small 
bills,  money  would  be  so  much  scarcer,  and  we  should  be 
troubled  for  change,  and  that  wages  and  prices  would  be 
materially  reduced. 


SIO  Buncombe's  ^ree  banking* 

This  reasoning,  at  the  first  blush,  appears  consistent ;  but 
remove  the  private  interest  of  the  banker  from  the  scales, 
and  with  it  will  disappear  his  sophistical  reasoning.  Wages 
will  not  be  lessened,  but  they  will  be  paid  in  money,  by  the 
removal  of  small  bills  ;  and  change,  instead  of  being  more 
scarce  will  be  more  plenty  and  convenient,  and  the  people 
will  see,  that  whatever  number  of  brokers  and  unnecesa- 
ry  bankers  are  supported  out  of  the  profits  of  the  currency, 
is  just  so  much  of  the  wealth  of  the  country,  and  conse- 
quently, the  currency  taken  from  the  common  stock  and 
consumed  :  for  it  is  useless  to  say,  that  this  gives  employ- 
ment to  so  many  men,  because  in  America  men  can  always 
find  profitable  employment  in  some  productive  business, 
and  men  are  as  much  wanted  as  capital.  Besides  this  loss 
of  men  and  money,  the  extravagance  and  luxurious  living 
of  bankers  and  brokers,  when  their  profits  are  enormous, 
produces  a  corresponding  desire  to  extravagance  among 
other  classes  of  society,  by  which  the  whole  community 
are  impoverished ;  for  whoever  lives  upon  credit  beyond 
his  income,  is  ^n  injury  to  community  to  the  extent  in  which 
he  lives  beyond  his  earnings. 

ON  CREDIT  CONNECTED  WITH  PUBLIC  IMPROVEMENTS. 

We  have  seen  that  the  private  interest  of  stockholders, 
in  incorporated  companies,  and  the  credit  upon  which  paper 
intended  to  circulate  as  money  is  issued,  have  expanded  the 
currency,  and  nominally  enhanced  the  value  of  property  in 
the  United  States — increased  importations,  facilitated  ex- 
travagance in  living,  in  dress,  in  houses,  in  horses  and 
carriages,  in  furniture,  in  personal  ornaments,  and  in  ten 
thousand  almost  nameless  ways — while  it  has  lessened  ex- 
ertions to  earn  and  honestly  procure  property  by  the  sweat 
o^  the  brow. 


duncombe's  free  banking.  211 

The  soft  bed  induces  longer  indulgence  on  it.  The  easy 
spring  sofa  prolongs  reclining  after  meals :  while  fashionable 
idlers  make,  and  expect  to  have  returned,  their  frequent 
morning  and  evening  calls ;  all  of  which  draw  largely 
upon  the  time  of  the  tradesman  and  mechanic,  and  increase 
his  expenses,  while  it  lessens  his  means  of  supporting  them. 
Bank  credit  has  laid  the  foundation  for  this  deranged  state 
of  things,  and  bank  credit  must  be  continued  and  increased 
if  they  are  supported. 

Foreign  merchandise  should  never  be  bought  upon  cred- 
it by  the  consumer,  as  it  requires  the  exportation  of  money, 
or  some  other  commodity,  to  meet  the  payment  in  a  foreign 
market ;  such  articles,  therefore,  should  not  be  consumed 
until  they  are  paid  for.  The  general  adoption  of  this  prac- 
tice would  lessen  foreign  importations  and  encourage  do- 
mestic manufactures. 

Formerly,  fine  houses  were  not  attempted  to  be  built  un- 
til the  builder  was  quite  prepared — ^both  with  materials 
and  money  to  finish  and  furnish  them  when  completed.  But 
times  are  strangely  changed  ;  the  fashion  now  is,  to  buy 
every  thing  you  want,  or  fancy  you  want,  upon  credit,  if 
you  can  get  trusted.  Credit  is  now  universally  used  for 
capital ;  and  if  a  man  has  a  credit  at  the  bank,  and  wants  to 
build  a  house,  or  ornament  his  place,  he  commences  with 
as  little  apparent  thought  of  how  or  where  he  is  to  obtain 
the  means  of  ultimately  paying  the  bank,  as  he  would  if 
pay  day  could  never  come,  or  the  money  he  received  from  the 
bank  was  an  old  deposite  of  his  own.  Is  it,  therefore,  any 
wonder  that  the  newspapers  are  filled  with  notices  of  sher- 
iff's sales,  offering  in  the  public  market,  not  only  the  house 
or  other  improvements  made  upon  credit,  but  the  lot  on 
which  it  is  built,  and  all  the  comforts  secured  by  years  of 
industry  and  economy  ? 


212  duncombe's  free  banking. 

States  have  followed  in  the  same  mad  career.  The  opin- 
ion of  a  party  has  been  mistaken  for  public  opinion  ;  the 
statements  of  interested  individuals  have  been  received  as 
the  unbiassed  opinions  of  creditable  witnesses.  The  suc- 
cess of  one  enterprise,  or  work  of  public  improvement,  af- 
ter being  emblazoned  from  Maine  to  Georgia,  is  made  the 
grounds  of  an  argument  for  commencing  public  improve- 
ments upon  credit  in  other  parts  of  the  Union.  For  in- 
stance, the  Erie  canal  and  Schenectady  and  Albany  rail 
roads  have  proved  profitable  investments  of  capital,  and 
have  afforded  great  public  convenience  and  accommoda- 
tions. Hence  it  has  been  inferred,  that  canals  and  rail  roads 
could  be  made  in  every  state  and  section  of  the  Union  upon 
credit ;  and  that  they  would  all  be  equally  profitable  and 
advantageous.  For  this  purpose,  as  the  states  had  no  sur- 
plus revenue,  or  special  fund  that  could  be  pledged  for  the 
payment  of  the  interest  of  the  money,  bank  credit  has  been 
used  as  capital,  and  hundreds  of  thousands  of  dollars  have 
been  invested  in  the  stocks  of  public  improvements  upon 
bank  credit  as  capital.  This  error  has  proved  fatal  to  the  | 
enterprises  and  to  the  speculators  themselves.  Many  of 
these  new  and  expensive  public  works  could  not  pay  if 
completed  :  and  they  cannot  be  completed  upon  bank  cred- 
it when  that  has  ceased  to  exist.  The  works  that  have 
been  commenced,  and  those  in  actual  operation,  although 
they  cannot  pay  for  some  time  to  come  ;  yet,  as  they  are  ra- 
pidly falling  to  decay,  they  require  legislative  relief  prompt- 
ly and  immediately.  The  system  of  currency  hereby  re- 
commended, will  afford  them  ultimately,  permanent  relief, 
by  encouraging  domestic  manufactures  and  agriculture — 
thereby  increasing  the  interchange  of  domestic  products 
with  foreign  countries,  while  the  money  will  be  retained 
by  the  reduction  of  our  imports  to  the  par  exchange  of  our 


dtjncombe's  free  banking.  213 

exports  :  our  currency  will  become  equalized  throughout 
the  Union,  convertible,  current,  convenient,  and  free  from 
inflations  and  consecutive  contractions. 

The  bank  paper  credit  party  expend  their  money  before 
they  have  earned  it.  States,  relying  upon  bank  credit  for 
capital,  have  expended  their  resources  before  they  have  been 
collected.  Bank  credit  and  foreign  credit  are  used  by  both 
as  capital.  No  one  thinks  of  giving  or  receiving  cash  for 
commodities  :  bank  notes  are  the  only  medial  commodity  ; 
whether  they  are  at  par  or  otherwise  they  are  made  to  an- 
swer for  a  circulating  medium. 

England  has  a  mortgage  on  nearly  one  half  of  the  states 
of  the  Union ;  and  unless  the  management  of  the  currency 
be  taken  out  of  the  hands  of  incorporated  companies,  and 
given  to  the  people,  it  must,  by  the  laws  of  its  situation,  of 
credit  and  of  incorporated  bank  paper,  have  a  mortgage 
upon  the  whole  Union. 

Nothing  now  but  strict  economy  can  save  the  states  from 
bankruptcy — both  the  people  and  the  state  governments. 

The  government  of  the  Union  may  retain  its  credit  and 
remain  solvent,  unless  it  should  madly  endorse  for  the 
states,  or  in  other  words,  assume  th  e  payment  of  the  state 
debts.  Then  would  the  government  and  people  of  these 
flourishing  states  be  reduced  to  the  situation  of  tenants  of 
the  bankers  and  brokers  of  England ;  paying  them  annu- 
allv  in  coin,  a  rent  for  our  public  works,  for  credit  bank 
paper  to  circulate  as  money  among  us,  and  for  our  very 
houses  and  farms.  But  no,  this  cannot  be  ! — "  The  sons 
of  America  were  never  born  to  be  slaves.'^  England,  nor 
her  Rag  Barons,  shall  ever  hold  under  their  jurisdiction 
one  foot  of  ground  in  this  **  land  of  the  free  and  home  of  the 
brave.''  Credit^  with  what  a  siren's  voice,  dost  thou  charm 
the  ear  !  What  witchery  is  there  not  in  thy  inviting  smile  ! 
s 


214  DUNCOMBE^S  FREE  BANKOCJ. 

How  fascinating  thy  offers  ot  wealth  I  How  easy  a  trade 
to  learn,  is  spending  money  !  While  credit  lasts,  how  few 
feel  that  pay-day  must  soon  come  !  And  habits  of  extrav- 
agance once  established  are  hard  to  be  broken  off.  But  the 
charm  of  unlimited  credit  must  be  si'aken  off — this  spell  of 
bewitching  enchantment  must  be  brol'vcn.  Men  must  re- 
turn to  habits  of  honest  industry  and  eccnomy,  and  learn  to 
earn  before  they  spend  their  money,  or  this  country  can  nev- 
er emerge  from  the  abyss  of  debt,  credit,  extravagance, 
misery  and  dependance  into  which  bank  notes  and  bank 
credit  have  imperceptibly  plunged  them. 

The  following  extract  shows  how  independent  the  Uni- 
ted States  may  become  whenever  they  shall  will  it  to  be  so. 
Our  resources  are  ample  for  domestic  j^rosperit y  and  liap- 
piness  :  our  imports  should  be  limited  to  the  par  exchange 
of  our  exports. 

"  Agricultural  Statistics  of  the  United  States. — The  Phila- 
delphia North  American  contains  a  very  valuable  table  with  the 
above  title,  and  containing  a  statenoent  of  the  agricultural  products 
of  all  the  states  but  three,  viz :  North  Carolina,  Michigan,  and 
Kentucky.  Fi'om  which  we  learn  that  the  largest  wheat  growing 
state  in  the  Union  is  Ohio — the  amount  16,000,000  bushels ;  the 
next  largest,  Pennsylvania  wnth  13,000,000  ;  the  next  New  York, 
11,000,000;  andthefourth,  Virginia,  with  10,000,000.  The  largest 
amount  of  Indian  corn  raised  in  one  state,  is  in  Tennessee — 42,- 
000,000  bushels;  Virginia,  34,<X)0,000  ;  Ohio,  33,000,000  ,  Indiana, 
28,000,000;  Illinois,  22,000,000;  Alabama,  18,000,000;  Georgia, 
17,000,000 ;  Missouri,  15,000,000. 

"  New  York  is  the  greatest  potatoe  growing  state  ;  amount  30,- 
000,000  bushels.  Maine  comes  next  with  10,000,000;  and  next 
Pennsylvania,  with  8,000,000. 

"  The  greatest  cotton  growing  states  are  Mississippi,  289,000,- 
000 lbs.— Alabama,  240,000,000- Georgia,  148,000,000— South  Car- 
olina, 134,000,000— Tennessee,  128,000,000— Louisiana,  87,000,- 
000— Arkansas,  23,000,000— Virginia,  10,000,000. 

*'  Louisiana  is  of  course   the  largest  producer  of  sugar,  amount 


buncombe's  free  banking.  215 

219,000,000  lbs. ;  New  York  comes  next,  with  10,000,000  lbs.,  the 
produce  of  our  forests. 

"  Tennessee,  as  she  is  first  in  corn,  is  also  first  in  swinf,  number 
2,795,000.    Ohio  stands  next,  with  2,000,000. 

<<  New  York  stands  first  for  wool;  next  Ohio,  Vermont,  Penn- 
sylvania and  Virginia. 

"Tennessee  again  stands  first,  for  tobacco,  amount  26,000,000  lbs.'. 
Maryland,  18,000,000— Virginia,  14,C00,000.  We  regret  we  1  ave 
not  the  returns  from  Kentucky.  In  corn  and  tobacco,  we  think  ihe 
shall  rank  with  the  best  of  her  sisters. 

''New  York  stands  first  for  lumber-,  value  83,788,000.  Next 
Maine,  ^1,808,000,  For  prodiTctsof  the  orchard  New  York  stands 
also  first;  valued  1,732,000.  For  products  of  dairy  New  York  is 
again  at  the  head;  value  ^10,000,000.     Vermont  next,  S4,892,000. 

"  The  '  A-gricultural  Statistics,'  from  which  the  above  extracts 
are  made,  abundantly  prove,  if  indeed  any  proof  were  wanting,  that 
this  country  possesses  within  herself  all  the  elements  of  greatness. 
We  can  rais3  and  manufacture  within  our  extended  territory  every 
article  necessary  for  our  sustenance  and  clothing.  Why  then  con- 
tinue to  pay  out  millions  every  year  for  French  silks,  Frenljh 
wines,  English  iron  and  English  broadcloths  7  There  must  be  a 
reform  in  this  particular,  or  we  shall  never  be  free  from  embarrass- 
ments.'^ — Troy  Whtq. 

Congress  must  organize  the  people  to  exercise  their  finan- 
cial powers,  as  they  now  exercise  their  political  privileges. 

The  people  must  elect  directors  from  every  part  of  the 
Union,  to  regulate  the  paper  portion  of  the  currency  ;  to 
ascertain  the  amount  of  specie  in  the  United  States,  and  the 
amount  of  currency  necessary  to  the  permanent  prosperity 
of  the  whole  people  ;  issue  paper  upon  so  much  of  the  specie 
as  shall  be  necessary  to  meet  the  demand  for  the  currency  ; 
procure,  engraved  in  the  best  manner  possible  to  prevent 
counterfeits,  so  many  bills  of  the  various  denominations  ne- 
cessary for  circulation,  of  not  less  than  twenty  dollars,  and 
execute  them  in  blank  as  United  States  directors  ;  apportion 
these  bills  between  the  several  states,  according  to  the  de- 


216  buncombe's  free  banking. 

mand  for  a  circulating  medium  in  eacli  state,  together  with 
a  specie  basis  sufficient  to  authorise  their  circulation  under 
well-established  principles. 

The  people  in  each  state  should  elect  state  directors,  to 
apportion  the  bills  and  specie  furnished  to  each  state  by  the 
United  States  bank  directors,  between  the  banks  of  dis- 
count, to  be  located  in  the  several  cities,  towns  and  dis- 
tricts in  each  state,  where  banks  of  discount  are  designed 
to  be  located,  and  to  take  a  general  supervision  of  the  same. 

The  electors  in  each  city,  town  or  district,  where  a  bank 
of  discount  is  to  be  located,  should  elect  directors  of  those 
banks  annually  as  they  elect  the  most  numerous  branch  of 
their  legislatures  j  who,  before  entering  upon  the  duties  of 
their  offices,  should  give  good  security  for  the  faithful  dis- 
charge of  their  duties,  and  the  prompt  payment  over  to 
their  successors  in  office  of  all  monies  and  property  of  the 
bank  in  their  possession ;  and  who  should  be  precluded 
from  discounting  any  notes  or  acceptances  in  which  a  bank 
director  has  any  interest. 

This  will  eifectually  remove  private  interesty  credit  and 
politics  from  the  currency. 

These  directors,  being  freely  elected  by  the  people,  and 
having  no  private  interest  but  that  of  their  re-election,  will 
direct  their  whole  energies  to  the  promotion  of  the  public 
good,  the  accommodation  of  the  fair  trader  of  the  place,  and 
the  preservation  of  their  own  popularity  by  the  correctness 
of  their  whole  published  financial  conduct. 

This  will  render  the  paper  portion  of  the  currency  use- 
ful to  the  large  commercial  dealer,  while  the  precious  met- 
als will  benefit  small  dealers  particularly. 

The  banks  will  then  discount  only  the  actual  business 
paper  of  the  traders  of  the  place,  having  but  short  periods 
to  run,  instead  of  preferring  the  fictitious  notes  of  specula- 


buncombe's  free  banking.  217 

tors  ;  since  the  regular  dealers  of  the  place  will  have  the 
election  of  the  directors.  And  thus  the  credits  of  the  bank 
will  be  applied  to  the  promotion  of  domestic  manufactures, 
and  works  of  permanent  utility. 

The  officers  of  the  United  States  batik  will  thus  be  ren- 
dered responsible  to  the  whole  people  of  the  United  States 
for  the  manner  in  which  they  discharge  their  duties,  and 
dependant  upon  them  for  their  re-election.  The  officers  of 
the  state  banks  will  stand  in  the  same  relation  to  the  inhabr 
itants  of  each  state  ;  while  the  directors  of  the  banks  of  dis- 
count will  be  responsible  to  the  electors  in  their  respective 
cities,  towns  and  districts,  through  the  ballot-boxes. 

The  separating  tlie  bank  of  issue  from  the  banks  of  dis- 
count, will  lessen  the  danger  of  expansions  of  the  currency, 
and  its  ruinous  consecutive  contractions. 

The  issuing  no  small  bills  will  filfthe  small  channels  of 
currency  with  gold  and  silver,  and  lessen  the  excitement 
from  any  political  or  financial  derangement,  whether  in  Eu- 
rope or  America. 

Specie  being  the  only  true  basis  upon  which  to  issue  bills 
to  circulate  as  money,  instead  of  notes  of  other  banks,  pub- 
lic bonds,  private  securities,  or  foreign  or  domestic  exchan- 
ges, that  has  been  too  often  used  by  chartered  banks,  will 
render  the  currency  perfectly  convertible  on  demand  at  the 
counter  where  it  was  put  in  circulation,  and  equally  current 
throughout  the  United  States. 

Currency  must  be  allowed  freely  to  flow  wherever  it  is 
demanded,  even  although  it  leave  the  country,  which  will 
enable  the  exchanges  always  clearly  to  indicate  the  state  of 
trade  between  trading  countries. 

The  exportation  of  specie  should  be  unrestrained  by 
banks,  or  other  artificial  means,  as  the  only  sure  check  to 
over-trading  and   over-importing.     The  tendency  of  coin 


218  duncombe's  free  banking. 

to  go  into  other  markets,  when  not  interfered  with,  checks, 
most  effectually,  the  tendency  to  excesses  in  business,  in 
expenses  of  living,  in  imports,  and  in  consumptions. 

THE  OBJECTIONS  TO  A  PAPER  CURRENCY  CONSIDERED. 

To  those  political  economists,  who  maintain  that  the  sys- 
tem of  currency  here  proposed,  by  authorising  the  circula- 
tion of  more  paper  than  there  is  specie  actually  in  the  vaults 
of  the  bank  at  the  time  of  the  discount,  gives  the  notes  of 
the  banks  a  credit  character  that  endangers  its  convertibility, 
and  thus  overthrows  many  of  the  arguments  used  in  its  fa- 
vor, and  weakens  the  force  of  all.  To  these  perfectly  philo- 
sophic objections,  allow  me  to  reply  :  that,  upon  the  first 
view,  that  impression  is  strictly  natural ;  while,  upon  a  more 
thorough  investigation  of  the  elementary  principles  of  cur- 
rency and  banking,  I  trust  we  shall  find,  that  paper  may  be 
made  strictly  convertible,  equally  current  throughout  the 
Union,  and  as  little  liable  to  expansions  and  contractions  of 
the  currency  as  if  it  consisted  exclusively  of  gold  and  sil- 
ver. But  first  let  me  premise,  that,  if  paper  had  not  been 
used  as  a  substitute  for  gold  and  silver,  and  made  to  circu- 
late as  money,  both  in  Europe  and  America,  we  should  be 
the  last  person  to  recommend  the  introduction  of  bank  pa- 
per credit,  or  in  fact  any  unlimited  credit,  either  foreign  or 
domestic. 

But  we  are  compelled  to  "  take  things  as  we  find  them;" 
and,  since  chartered  bank  paper  has  raised  the  nominal 
value  of  landed  property,  the  expressed  value  of  contracts, 
of  merchandise  and  other  commodities,  far  above  what 
they  would  have  been  estimated  in  a  currency  composed 
exclusively  of  the  precious  metals,  justice  to  all  parties  re- 
quires that  we  should  not  hastily  change  their  measure  of 
value,  but  allow  the   people  to  manage  that  matter  them- 


buncombe's  free  banking.  219 

selves,  lest  the  shock  occasioned  by  the  change  should  over- 
turn our  other  valuable  political,  religious,  civil  and  litera- 
ry institutions.  For  rest  assured,  that  bankers,  brokers  and 
speculators,  with  their  long  train  of  attendants  and  depen- 
dants, will  make  a  desperate  battle  in  defence  of  privileges 
which  they  have  exclusively  enjoyed,  until  they  almost  fan- 
cy themselves  entitled  to  command  them  as  a  matter  of 
right. 

In  the  United  States  we  have  nominally  a  mixed  curren- 
cy, composed  of  paper  and  gold  and  silver,  which  were 
originally  intended  to  have  been  perfectly  interchangeable 
for  each  other  and  equally  current  throughout  the  Union. 
But,  by  degrees,  through  the  intervention  of  small  bills, 
the  metalic  portion  of  the  currency  has  been  withdrawn 
from  circulation,  until  their  perfect  interchangeability  has 
been  lost,  and  their  uniform  current  circulation  throughout 
the  Union  destroyed.  Our  enquiry  then  necessarily  is, 
how  has  this  transmutation  of  the  currency  been  produced, 
and  what  were  the  agents,  or  causes,  by  which  it  has  been 
so  imperceptibly  accomplished  ?  for,  since  "  like  causes 
produce  like  effects,'*  if  we  admit  into  this  system  of  mix- 
ed currency,  under  the  plan  of  free  banking  herewith  pro- 
posed, the  same  principles  that  brought  about  the  present 
inflation,  deterioration,  and  consequent  inconvertibility  of 
the  paper  portion  of  the  currency,  we  shall  assuredly  have 
ultimately  the  same  expansions  of  the  currency,  the  same 
depreciation  in  its  value,  and  the  same  interchangeability 
of  the  paper  portion  of  the  currency,  that  exists  at  present. 
But  if  we  have  discovered,  and  provided  for  the  removal 
of  the  cause  of  these  evils,  we  shall  have  nothing  to  ap- 
prehend from  any  bad  effects  upon  the  currency  from  the 
introduction  of  paper  for  a  certain  portion  of  it. 

We  have  seen,  in  another  place,  that  the  medial  commod- 


^20  buncombe's  free  banking. 

ity  in  one  country  and  nation,  differs  frequently  very  ma- 
terially from  that  of  another  ii9,tion ;  and  that,  although  no 
kind  of  money  except  specie  is  useful  as  a  measure  of  val- 
ues, or  a  medium  of  the  transfer  of  other  commodities,  in 
the  country  where  this  particular  currency  is  not  received 
and  used,  yet  bank  paper,  square  pieces  of  -Chinese  metal, 
and  shells,  all  possess  some  value  with  neighboring  nations 
who  are  trading  \vith  the  people  using  any  particular  kind 
of  money,  as  the  bits  of  metal  used  by  the  Chinese  for  mon- 
ey. Now,  so  long  as  the  medial  commodity  is  uniformly 
perfectly  convertible  into  whatever  may  be  desired  for 
commerce  or  consumption,  it  is  quite  immaterial  of  what 
that  instrument  of  common  circulation  is  composed — the 
cheaper  and  least  expensive  material  being,  from  principles 
of  economy,  naturally  preferred,  since  whatever  expense 
can  be  saved  in  the  value  of  the  currency,  is  so  much  ad- 
ded to  the  general  fund  of  productive  industry  or  commer- 
cial profit. 

So  much  paper  then  as  can  be  made  uniformly  perfectly 
interchangeable  for  gold  and  silver,  is  preferable  to  gold 
and  silver  from  these  causes,  as  well  as  from  its  greater 
convenience  for  commercial  transactions.  Our  next  enqui- 
ry then  is,  how  this  perfect  convertibility  of  the  paper  por- 
tion of  the  currency  is  to  be  preserved  1  In  answering 
that  question,  we  are  almost  instinctively  led  to  ask  another 
question,  viz  :  by  what  natural  law,  or  from  what  defect 
in  the  organization  of  the  system  of  the  paper  portion  of 
the  present  currency,  was  its  inter  changeability  destroyed  ] 
The  discovery,  exposure,  and  remedy  of  this  evil,  consti- 
tutes the  business  of  this  publication. 

In  this  work  we  have  endeavored  to  show,  that  all  the 
defects  in  the  constitution  and  organization  of  the  paper 
portion  of  the    currency,  may  be  traced  either  directly  or 


ii^r'finilii-iilliliyiilMlilittilllMllii^^   i  i  ■  m' iiiiiii  ri--iiiiiiiiii  irH 


buncombe's  free  banking.        221 

iadirectly  to  the  influence  o^ private  interest,  credit  or  'poli- 
tics ;  andtPiat  much  of  the  bad  administration  of  the  curren- 
cy is  attributable  to  the  banks  discounting  fictitious  paper, 
dealing  in  exchanges,  and  checking  at  times  the  free  circu- 
lation of  specie  by  the  issue  of  small  bills,  and  by  artificial 
means  obstructing  the  free  exportation  of  specie,  by  which 
the  exchanges  are  prevented  from  indicating  the  exact  state 
of  trade  with  foreign  countries,  and  thus  inducing  over- 
trading and  over-importing.  The  remedies  have  been  de- 
scribed and  treated  of  previously,  and  will  be  more  fully 
explained  hereafter.  They  consist,  briefly,  in  giving  back 
to  the  people  privileges  at  present  conferred  upon  state 
chartered  banking  companies. 

It  must  not  be  forgotten  by  us,  in  our  over  anxiety  to 
render  currency  republican,  that  our  other  elementary 
principles  of  the  government  are  republican,  and  that  we 
must  expect,  in  attempting  to  change  the  character  of  cur- 
rency from  aristocratic  to  republican  principles,  that  is,  in 
attempting  to  expose  to  public  view  the  anti-republican 
principles  and  other  defects  and  incongruities  ol  the  cur- 
rency, that  we  shall  have  to  meet  in  array  against  us  all 
those  who  are  interested  in  the  continuance  of  the  present 
credit  currency  by  chartered  companies  for  banking  pur- 
poses, and  associations  under  general  banking  laws.  They 
will  be  followed  by  all  the  aristocrats,  who  think  the  gov- 
ernment already  too  republican,  and  that  the  people  are 
incompetent  to  govern  themselves  even  in  the  matters  al- 
ready entrusted  to  them.  Not  far  from  this  array  may  be 
expected  to  be  found  the  timid,  who  always  fear  to  meddle 
with  the  elementary  principles  of  government,  as  being  too 
sacred  and  too  important  to  be  spoken  of  familiarly  ;  and  at 
the  same  time  too  diflBcult  of  comprehension  to  be  likely  to 
be  improved  by  alterations.     Then  next  comes  a  class  of 


^.^^.^     ..-.^j,^..:.. 


S22  duncombe's  free  banking. 

dependants  upon  credit,  and  who  cannot  liear  the  most  un- 
limited credit  spoken  against,  without  instinctively  starting 
to  their  feet,  and  arming  themselves  for  the  defence  of  the 
credit  system  ;  they  shout  for  credit,  the  whole  credit,  aiid 
nothing  but  credit ;  (how  little  they  understand  the  sub- 
ject of  which  they  speak.) 

With  all  this  formidable  array  against  us,  we  shall  have 
but  little  prospect  of  arousing  the  sober,  honest,  producing 
farmer,  mechanic,  and  laborer,  to  enlist  in  our  cause.  The 
merchants  are  either  in  debt  themselves  to  the  banks,  or  to 
the  wholesale  dealers,  and  they  want  money  to  be  contin- 
ued quite  as  plenty,  whether  it  be  good  or  bad,  as  it  is  now ; 
or  if  they  are  not  dependant  themselves  upon  credit  or  the 
banks,  many  of  their  debtors  are,  and  they  fear  to  les- 
sen their  means  of  paying  them — as  if  the  proposed  plan 
was  likely  to  lessen,  instead  of  increasing  the  quantity  of 
the  circulating  medium,  and  the  facilities  of  obtaining  it. 
The  wholesale  dealers  are  indebted  abroad,  and  they  have 
large  stocks  of  goods  on  hand  ;  and  plenty  of  money  makes 
high  prices,  and  by  the  laws  of  their  situation,  they  are  vio- 
lently opposed  to  even  the  investigation  of  the  subject- 
They  will  be  well  satisfied,  I  trust,  when  they  have  seen  its 
successful  operations. 

The  learned  profession  of  the  law  may  be  expected  to 
take  the  lead  in  debating  the  question,  and  in  writing  for 
the  press  against  us  ;  by  the  laws  of  their  situation,  it  can 
hardly  be  expected  to  be  otherwise,  as  it  must  lessen  much 
of  their  most  profitable  business,  and  besides  they  they  are 
professionally  aristocrats.  Rendering  the  currency  sound 
and  republican  lessens  the  distinction  and  difference  be- 
tween the  ranks  and  classes  of  society,  that  all  who  occupy 
the  highest  rank,  wish  to  have  as  broad  and  distinct  as  pos- 
sible.    Besides  this,  they  have  a  direct  interest  in  combat- 


BUNCOMBE  S  FREE  BANKING.  223 

ting  our  principles ;  for,  as  we  check  legislation  upon  any 
subject,  we  lessen  the  complexity  of  the  laws,  and  conse- 
quently lessen  the  necessity  for  the  greatest  number  of  ex- 
pounders of  the  laws.  Again,  by  lessening  excessive  cred- 
its, we  deprive  the  profession  of  the  law  of  one  half  of  their 
livings.  I  will  venture  to  predict,  that  upon  a  careful  exam- 
ination of  any  extensively  practicing  lawyer's  docket,  you 
shall  find  that  half  of  his  business  has  grown  out  of  exces- 
sive credits  or  bank  loans  ;  hence,  how  is  it  possible  that 
they  should  not  be  uniform  in  their  opposition.  I  know 
many  pure  patriots  among  this  learned  profession,  who 
are  as  honorable  as  any  class  of  citizens  in  America ;  yet, 
by  the  laws  of  their  situation,  they  are  opposed  to  us  ;  and 
those  who  magnanimously  prefer  the  public  good  to  their 
own  interests,  as  bank  solicitors,  bank  lawyers,  and  asso- 
ciates of  bank  directors,  and  associates  with  the  aristocrats, 
of  the  court  and  of  the  state,  have  greater  sacrifices  to  make 
than  can  be  expected  of  many  ;  but  rest  assured,  there  will 
be  some  honorable  exceptions  in  favor  of  a  purely  republi- 
can government,  which  ours  cannot  be  until  the  currency 
of  the  country  shall  become  as  purely  republican  as  our 
politics,  religion,  literature  and  social  habits. 

I  have  thought  it  necessary  to  examine  the  array  that 
will  be  likely  to  be  brought  against  us,  and  their  reasons 
for  their  opposition,  that,  while  we  attempt  to  defend  our- 
selves against  one  attack,  we  do  not  lay  ourselves  open  to 
many  others  still  more  powerful.  I  am  aware,  that  my 
ideas  upon  this  subject  are  somewhat  crude  and  indigested, 
but  they  are  purely  oi-iginal ;  however  much  I  am  indebted 
to  other  authors  for  my  language,  I  believe  I  shall  never 
be  charged  with  having  borrowed  my  ideas,  as  I  have  not 
seen  or  heard  them  advanced  before  I  have  advanced  them 
on  several  occasions,  both  in  public  speeches  and  private 
conversation  and  correspondence. 


SS4  dttncombe's  free  banking. 

But  to  return  to  the   charge,  that,  as  our  system   admits 
of  the  circulation  of  more  paper  than  we  have  coin  in  our 
vaults,  it  becomes  a  credit  paper,  and  liable  to  the  objections 
common    to  a   credit  currency.     We  have  frequently  re- 
marked, and  will  here  again  remark,  that  the  exchanges  al- 
ways indicate  the  state  of  trade   between  two  countries  ; 
and  that  the  tendency  of  coin  to  flow  abroad,  is  the  only  ef- 
fectual preventive   of  over-trading    and    over-importing. 
Now  I  prefer,  and  would  show  many  reasons  why  the  cur- 
rency of  the  country  should  only  consist   of  the  precious 
metals,  were  it  not  for  two  reasons ;  the  first  is,  that  at  the 
present  prices  of  every  transferable  material,  there  is  not 
metalic  currency  enough  to  conveniently  exchange  the  va- 
rious commodities,  and  transact  the  business  of  the  country. 
The  varying  the  nominal  value  of  property  would  interfere 
with  existing  contracts  between  debtor  and  creditor,  which 
should  always  be  preserved  and  maintained  inviolate.  The 
inflation  of  the  currency   of  foreign  countries,  with  whom 
we  have  commerce,  and  especially  the  inflated  state  of  the 
currency  of  England  in  particular,  by  their  using  credit  pa- 
per as  a  circulating  medium,  is  a  powerful  argument  in  fa- 
vor of  the  continued  use  of  paper  to    circulate  as  money 
here.     England  is  a  country  of  credit  and  punctuality   of 
payment :  their  very  existence,  as  an  independent  nation, 
rests  solely  on  the  punctuality  with  which  they  meet  their 
engagements.     And  their  punctuality  in  meeting  the  pay- 
ments of  interests  as  they  become  due,  has  produced  a  per- 
fect convertibility  in  the  funded  or  bonded  debt  of  England; 
consequently  that  debt  has  become  a  capital  to  the  nation. 
In  a  republic,  a  debt  could  never  be  made  a  permanent  sup- 
port; because  of  the  equality  of  conditions,  the  obnoxious- 
ness  of  taxes,  and  the  frequent  changes  in  the  administra- 
tion, must  render  a  national  debt  unpopular   and  unsafe. 


iiflffr^iii-  ^triifiii  u  j^yj^|igg|g^gg| 


buncombe's  free  banking.  225 

The  party  in  power  never  will  tax  themselves,  unless  un- 
der circumstances  of  a  very  great  emergency,  and  then  on- 
ly for  a  very  short  time,  and  to  a  small  amount.  While  in^ 
monarchy,  where  the  few  govern  the  many,  the  case  is  re- 
versed. The  law  makers  and  its  administrators  are  not  in 
any  way  accountable  to  the  people  for  the  manner  in  which 
they  discharge  their  official  duties ;  or  at  most,  not  more 
frequently  than  once  in  seven  years  ;  unless  at  shorter  in- 
tervals the  Throne  may  dissolve  the  Parliament,  when  the 
government  may  choose  its  own  time  for  the  dissolution. 
Thus  the  accountability  of  the  governing  power  to  the  gov- 
erned is  remolp  and  uncertain,  and  frequently  may  be  al- 
together avoided.  The  few  tax  payers  after  all,  who  can 
exercise  even  the  elective  franchise  in  their  limited  viva 
v^e  manner,  renders  the  Jew  "perfect  lords"  over  the  ma- 
ny ;  to  which  may  be  added  the  long  list  of  sinecurists, 
pensioners  and  officers,  and  others,  upon  full  pay  and  upon 
half  pay — with  an  immense  constabulary,  policemen,  ar- 
my and  navy,  at  the  beck  of  the  government,  to  aid  the  tax- 
gatherer  and  the  collector — with  the  immense  wealth,  pow- 
er and  religious  influence  of  an  established  church  :  all  de- 
pendant upon  the  continuance  of  the  payment  of  the  taxes, 
and  the  collection  of  the  revenue,  for,  not  only  their  com- 
forts, but  many  of  them  are  dependant  upon  this  source  for 
their  very  support  from  day  to  day.  But  most  of  all,  and  far 
stronger  than  all  these,  is  the  individual  private  interest  of 
every  fund-holder  in  England ;  he  has  a  direct  and  posi- 
tive interest  in  the  support  of  the  government  equal  to  the 
amount  of  the  public  debt  he  holds. 

We  have  before  remarked,  that  if  we  had  precious  met- 
als sufficient  to  supply  the  demand  for  currency,  we  should 
not  have  occasion  to  issue  paper  to  circulate  as  money  ; 
but,  since  the  gold  and  silver  in  the  country  is  insufficient  to 


226  dijncombb's  free  banking. 

serve  all  the  purposes  of  American  commerce  and  enter- 
prise, we  are  compelled  to  make  the  best  substitute  in  our 
power.  "We  have  before  seen,  that  in  countries  without 
banks,  and  even  without  coin,  or  with  but  a  very  limited 
quantity  of  currency,  the  people  have  uniformly  invented 
and  institute'd  substitutes  for  coin.  We  have  seen  shells  in 
one  country,  skins  in  another  country,  square  bits  of  metal 
in  another  country,  and  beef,  pork,  live  stock,  horses,  hogs, 
grain,  lumber  and  iron  in  other  countries,  all  substituted 
for  currency,  or  for  coin  to  circulate  as  money  ,•  and  even 
the  smallest  private  promissory  bills  or  notes,  to  be  paid  in 
flour,  in  grain,  or  store  pay,  when  specie  and  bills  have  been 
entirely  withdrawn  from  circulation,  have  been  allowed  to 
circulate — sometimes  only  as  change,  at  other  times,  and  in 
other  places,  they  have  constituted  the  principal  circulating 
medium  of  the  country. 

Hence  we  conclude,  that  if  all  the  bank  paper  that  now 
circulates  as  money  in  the  United  States,  was  to  be  with- 
drawn from  the  circulation,  the  specie  remaining  not  being 
a  sufficient  instrument  for  the  whole  community  to  use, 
some  other  medium  would  be  used  instead  of  the  present 
bank  notes.  I  am  not  desirous  of  lessening  the  circulating 
medium  below  the  full  supply  of  the  actual  demand ;  nor 
do  I  propose  to  withdraw  the  present  bank  paper  from  the 
circulation,  until  its  place  is  fully  supplied  by  a  better  cur- 
rency, as  the  charters  of  the  banks  expire  one  after  another. 


DUNCOMBE  S  FREE 


BANKING,    ^'   /^   ^        227'      j 


■'^> 


CHAPTER  XXXVII. 


''^.V>/'' 


ON   EXCHANGES,    AND    THE    MYSTERY    INVOLVED    IN   THEIR 
COMPUTATION. 

Exchanges  left  free  to  private  competition,  favorable  to  commerce. — ^The  business 
of  banks  is  lending  money,  not  dealing  in  exchanges. — The  free  exportation  of  spe- 
cie regulates  the  price  of  exchange,  and  checks  over-trading. — The  exporta- 
tions  of  merchandise  better  than  being  in  debt. — Accumulations  of  credit,  whether 
of  banks,  states,  or  of  the  United  States,  only  delay  payment. — Kxchanjfes  etfected 
by  the  sale  of  public  stocks  in  a  foreign  market — British  banks'  endorsed  bills. — 
The  United  States  Bank  the  first  dealer  in  exchanges. — Philadelphia  United  States 
Bank — its  business — its  losses — its  censures — influence  upon  prices,  on  exchange, 
on  cotton — Mr.  Biddle  and  Mr.  Jordan  blamed — Their  conduct  natural — Like 
raany  others — only  more  known — wider  extended  operations. — The  dangers  of 
chartered  companies. — Legitimate  banking. — Legal  alteration  of  the  value  of  the 
precious  metals  unjust — lessens  stability. — Legal  enactments  may  delay  the  ex- 
portation of  specie,  but  it  must  ultimately  come. — The  old  computation  of  the 
pound  sterling  incorrect — explained — recent  computations. — ^Tho  par  exchange 
9i  per  cent,  above  the  computed  par — It  should  be  quoted  in  dollars  and  cents, 
on  the  par  exchange. — British  gold  and  silver  received  as  coin— when  of  full 
weight  and  fineness,  by  tale — light  coins  by  weight. — American  coins  in  England 
pass  only  as  bullion. — United  States  bank  and  branches  injurious  to  commerce. — 
Suppose  a  company  chartered  to  regulate  weights  and  measures. — An  United 
States  Bank  and  branches  more  dangerous  now  than  formerly — more  business — 
mere  influence. 

Tke  exchanges  should  always  be  left  perfectly  free  and 
open  to  private  competition  in  the  cash  and  bill  market. — 
When  that  is  the  case,  there  can  never  be  any  danger  of  bills 
rising  above  their  true  value,  or  falling  below  their  real 
worth  ;  neither  buyers  or  sellers  of  bills  can  suffer  much 
from  an^  attempts  of  private  individuals  to  monopolize  the 
bill  market,  either  domestic  or  foreign,  as  the  buyer,  if  he 
suspects  the  price  is  too  high,  can  export  specie  (where  the 
cash  market  is  open  and  free.,)  at  about  one  per  cent. 

Private  individuals  cannot  control  the  cash,  or  expand  or 
contract  the  floating  currency,  at  their  will  and  pleasure,  as 
banks  can,  to  meet  their  own  interest  of  buying  and  selling 
bills.  The  true  business  of  banks  of  discount  is  lending 
money,  by  discounting  real  business  faper^  having  but  a 
short  time  to  run. 

Removing  the  interference  of  the  banks  with  the  exchan- 
ges, except  they  guarantee  bills  for  a  regular  per  centage, 


228  duncombe's  free  banking. 

as  being  often  better  known  than  individuals,  and  less  liable 
to  inconvenience,  from  being  unexpectedly  required  to  al- 
ter or  change  the  remittance  or  money  at  a  moment's  warn- 
ing, and  as  being  more  generally  informed  of  the  customs 
and  forms  used  and  required  in  foreign  markets ;  and  al- 
lowing the  free  exportation  of  specie,  whenever  the  actual 
rate  of  exchange  shall  demand  it,  will  most  eifectually  pre- 
vent over-trading,  by  warning  the  importer  of  the  danger 
of  importing  goods  that  cannot  be  sold,  especially  when  it 
must  cost  him  much  to  obtain  remittances  to  pay  for  them  ; 
and  whenever  he  finds  the  specie  leaving  the  country,  he 
knows  that  more  goods,  bills  or  money  have  been  imported 
than  there  is  means  in  the  market  to  pay  for,  and  he  will 
not  madly  "  carry  coals  to  New  Castle." 

He  knows  that  goods  cannot  be  safely  sold  upon  credit, 
when  there  is  nothing  coming  into  the  market  to  meet  the 
demand  for  remittances  ;  and,  if  he  cannot  sell  for  money, 
a  prudent  merchant  would  make  his  remittances  with  the 
same  material  that  he  imported  at  a  loss,  sooner  than  re- 
main involved.  This  has  frequently  been  done  during  the 
recent  fluctuations  of  the  market,  at  a  loss  of  importation^ 
exportation,  ii^iterest,  shipment,  re-shipment,  insurances,  and 
damage  of  ordinary  wear  in  transportation  not  assured 
against.  But  even  this  may  still  be  a  better  business  for 
the  importer  than  any  sale  he  could  make  in  America  for 
cash,  and  his  situation  may  be  such  that  he  cannot  sell  them 
upon  credit,  the  only  way  they  could  have  been  disposed  of 
at  a  nominal  profit.  If  the  best  market  for  his  goods,  is 
the  place  from  whence  they  were  imported,  they  should  be 
re-shipped  and  exported  to  that  market.  That  is,  if  the  sale 
of  English  good§  in  the  English  market  constitutes  the  best 
remittances  that  can  be  made  to  pay  an  English  debt,  or 
if  their  sale  in  it  is  better  than  they  are  in  America,  then  the 


dunoomSe's  free  banking,  229 

merchant  is  justified  in  re-shipping  his  goods  to  make  his 
remittance,  even  although  it  be  at  a  loss. 

In  times  of  great  money  pressures,  temporary  relief  may 
be  afforded  to  the  merchant  by  the  introduction  of  some 
new  credit,  after  the  ordinary  credits  have  been  exhausted 
by  over-straining  in  over-trading  ;  as  by  the  addition  of  the 
credit  of  a  bank  to  ordinary  private  bills,  and  remittances 
made  by  individuals,  or  by  the  introduction  into  the  mar- 
ket of  a  new  commodity,  as  of  state  stocks,  or  of  United 
States  bonds.  These,  for  a  time,  while  the  amount  of  the 
sales  are  being  drawn  for,  will  relieve  the  money  market, 
and  lessen  the  rate  of  exchange  against  the  selling  country, 
or  perhaps  even  produce  a  balance  temporarily  in  favor  of 
that  country,  where  the  rate  of  exchange  had  been  too 
high  for  bills  to  be  in  the  market,  as  the  exportation  of  spe- 
cie would  be  less  expensive  than  the  purchase  of  bills  for 
ifemittances. 

The  banks  in  British  America  pursued  an  honorable  course 
toward  bill  dealers,  until  they  become  dealers  in  exchanges 
themselves  :  they  endorsed  or  guaranteed  the  bills  for  in- 
dividuals at  a  small  per  centage.  But  since  they  have  be- 
come dealers  in  bills  of  exchange  themselves,  the  practice 
of  guaranteeing  bills,  I  believe,  has  been  generally  discon- 
tinued, as  I  supppose  they  find  it  more  profitable  to  regu- 
late the  rate  of  exchange  to  meet  their  interest  in  the  bill 
market,  than  guaranteeing  bills  for  others.  They  thus  have 
exchanged  one  positive  public  good  for  two  as  positive  evils. 
The  first  is,  the  purchaser  must  pay  higher  for  a  bill  than 
he  would  have  done,  had  the  price  been  left  to  private  com- 
petition, as  it  is  in  every  other  part  of  the  world,  and  was 
in  the  United  States,  until  the  United  States  bank  interfer- 
ed with  exchanges.  The  other  is,  it  disturbs  the  balance 
of  trade,  as  indicated  by  the  reported  price  of  exchanges, 


230  buncombe's  free  banking. 

which  should  exactly  indicate  the  state  of  trade  between 
two  countries,  that  importing  and  exporting  merchants  may 
not  be  misled  in  their  commercial  transactions. 

The  guaranteeing  of  bills,  by  banks,  for  a  per  centage,  is 
no  doubt  exceeding  their  legitimate  business  ;  yet  the  evils 
that  grow  out  of  it,  since  it  left  the  remitter  free  to  get  his 
bill  guarantied  or  not,  as  he  chose,  is  far  less  than  the  mo- 
nopoly of  the  whole  business  by  the  banks. 

The  United  States  bank,  that  established  this  monopoly 
within  the  last  twenty  five  years,  possessed  decided  advan- 
tages over  private  individuals  for  dealing  profitably  in  ex- 
changes, both  domestic  and  foreign,  owing  to  her  numerous 
branches  and  complete  organization,  as  well  as  her  immense 
power  of  increasing  or  lessening  the  value  of  money  and 
of  exchanges,  wherever  and  whenever  it  suited  her  pur- 
pose. She  could  thus  make  a  profit  upon  every  variation 
of  the  exchanges.  Since  the  cessation  of  the  operation  of 
the  United  States  bank,  the  Philadelphia  United  States 
bank,  and  other  banks,  that  have  been  engaged  in  exchan- 
ges or  merchandise  and  other  operations,  have  been  an  addi- 
tional tax  upon  the  importer  and  remitter;  they  have  been 
apparently  convenient,  but  really  very  expensive. 

The  Philadelphia  United  States  bank,  with  other  banks, 
that  have  since  dealt  in  exchanges  and  merchandise,  have 
frequently  very  sensibly  influenced  the  price  of  exchanges 
and  of  other  commodities.  It  will  be  admitted  by  all,  who 
have  witnessed  the  operations  of  the  United  States  bank  of 
Philadelphia,  that  she  alone  kept  the  price  of  cotton  above 
what  it  would  otherwise  have  been,  perhaps  ten  or  fifteen 
per  cent.,  for  more  than  two  years,  by  her  influence  upon 
trade,  commerce  and  exchanges  ;  but  she  as  well  as  the 
public,  have  suflered  seriously  from  the  consequences,  and 
her  officers  and  directors  are  receiving  severe  castigations 


duncombe's  free  banking.  231 

from  almost  every  part  of  the  Union.  But  wliy  vent  all 
the  spleen  of  a  disappointed  loosing  public  upon  Mr.  Bid- 
die,  Mr.  Jaudon,  and  the  other  directors  and  officers  o^that 
institution  ]  What  they  did  was  perfectly  natural.  In  fact 
it  may  be  said  to  have  been  almost  unavoidable  ;  it  was  in 
strict  accordance  with  the  laws  of  their  situation,  and 
what  hundreds  of  other  chartered  banks  haye  done,  and 
are  daily  doing.  The  only  difference  is,  the  capital,  credit 
and  skill  in  the  business  of  this  institution  was  far  greater 
than  that  of  the  ordinary  banks  ;  and  consequently,  when  it 
failed  of  success  in  its  speculations,  a  much  greater  num- 
ber of  persons  were  involved  in  the  failure,  and  the  amount 
of  loss  was  actually  much  greater  than  that  of  any  other 
one  bank,  both  to  the  bank  itself,  and  to  those  connected 
with  its  speculations.  And,  as  a  light  placed  on  high  is 
seen  at  a  greater  distance  than  small  lights  that  are  placed 
low,  so  this  institution,  by  its  high  credit  and  immmense  in- 
fluence, better  illustrates  the  principles  and  conduct  of  all 
chartered  banking  companies  than  smaller  examples;  in 
fact  the  frauds  of  smaller  banks  can  now  no  more  be  seen, 
in  presence  of  this  immense  culprit,  than  stars  can  be  seen 
in  presence  of  the  sun  ;  still  no  one  doubts  the  existence  of 
the  one  more  than  that  of  the  other.  For  although  small 
banks  have  been  less  sinners,  yet  their  sins  have  been  the 
same,  or  others  not  less  profitable  to  themselves  or  less  a 
tax  to  the  public,  only  in  proportion  to  their  lessened  abili- 
ty to  accomplish  extended  operations,  or  the  superior  vigil- 
ance of  the  public  and  rival  institutions  over  them.  As  an 
example,  witness  the  greater  uniformity  in  the  curren- 
cy of  New  England  over  that  of  the  more  western 
states.  Their  sounder  currency  is  probably,  among  many 
minor  causes,  to  be  principally  attributed  to  the  vigilant 
supervision  of  the   public  over  the   banks,  and  to  the  uni- 


232  duncombe's  free  banking. 

form  practice  of  the  banks  in  demanding  balances  due  from 
each  other  at  short  and  regularly  stated  periods,  by  which 
their  circulation  has  been  confined  within  nai  rower  limits, 
and  their  business  much  more  generally  restricted  to  the 
discounting  of  actual  business  paper,  having  1  ut  short  p(;ri- 
ods  to  run. 

Whenever  a  bank  departs  from  its  legitimise  duties,  that 
of  lending  money  upon  the  discount  of  acf  ua  I  business  pa- 
per, having  but  short  periods  to  run,  the  ciu'iency  becomes 
inflated,  and  its  convertibility  endangered.  It  is  all  the 
same  to  the  currency,  whether  it  be  fictitious  notes  that  are 
discounted  or  bills  of  exchange,  or  cotton  t  hat  is  bought 
with  bank  notes,  they  each  inflate  the  money  currency. 
These  operations  may  enable  a  few  individuals  to  amass 
splendid  fortunes  at  the  public  expense  ;  1  )Ut  the  public  and 
the  uninitiated  stockholders  being  the  loc/sers,  cannot  fail  to 
reprobate  their  conduct.  When  will  the  piiblic  learn  wis- 
dom by  experience]  when  find  instn  ictioj  i  in  the  past? 
Never — never,  until  they  take  the  business  of  regulating 
the  paper  portion  of  the  currency  into  thei  r  own  hands ; 
and  instruct  their  peers  to  conduct  banking  to  suit  their 
own  real  wants,  and  for  the  accommodation  of  their  actual 
business :  then  every  day's  expericTiCe  will  l)e  a  lessen  for 
future  improvement. 

The  interference  of  the  banks  with  exchanges,  commerce 
or  credit,  has  precisely  the  same  effects  upon  the  measure 
of  all  values — the  money-currency — that  altering  the  legal 
value  of  the  coin  of  the  country,  by  the  government,  has 
upon  its  exactness  as  a  measure  of  value  ;  excepting  that 
the  latter  is  a  political  as  well  as  a  financial  frau<  I. 

The  law  may  give  either  gold  or  silver,  or  both  of  them, 
higher  legal  value  within  the  government  of  the  country 
where  the  law  exists  than  they  previously  possessed,  but  it 


buncombe's  free  banking.  233 

is  the.  market  price  that  establishes  its  real  value,  which 
must  always  be  found  by  an  examination  of  the  exchanges, 
and  the  price  the  coin  bears  in  foreign  markets. 

If  the  legal  value  of  any  coin  (as  of  the  American  Ea- 
gles, and  parts  thereof,)  be  raised  or  lowered  above  or  be- 
low its  former  value,  this  operation  expands  or  contracts 
the  currency  precisely  as  do  the  over-issues  and  contrac- 
tions of  the  circulation  of  the  banks. 

Money,  like  water,  will  finds  its  level,  and  whether  that 
level  be  high  or  low,  with  regard  to  the  surrounding  ob- 
jects, is  not  very  material,  so  that  there  be  a  sufficiency  of 
the  one  or  the  other  for  all  the  operations  which  they  were 
respectively  designed  to  perform. 

The  increasing  the  circulation  by  legally  raising  the  val- 
ue of  gold  and  silver,  or  either  of  them,  or  by  the  expan- 
sions of  the  currency  by  the  increased  issues  of  the  banks, 
raises  it  above  its  former  level,  the  channels  become  sur- 
charged and  must  flow  out ;  but  as  neither  paper  money  nor 
depreciated  gold  and  silver  will  circulate  in  a  foreign  mar- 
ket, the  precious  metals  will  be  exported,  and  the  coin  that 
is  alloyed  will  only  pass  as  bullion,  valued  according  to  the 
weight  of  the  fine  metal  it  contains,  and  its  exportation  is  at- 
tended with  this  additional  loss.  It  is  true  that  this  loss 
may  dam  up  the  channels  of  circulation  for  a  time,  and  re- 
tard its  exportation,  by  advancing  the  price  of  bills  of  ex- 
change, and  of  all  other  exportable  commodities ;  but  all 
this,  instead  of  having  a  salutary  and  beneficial  effect  upon 
our  commerce,  trade  or  exchanges,  has  directly  the  oppo- 
site eflPect,  since  it  raises  the  nominal  value  of  commodi- 
ties, and  increases  their  accumulation,  not  in  proportion  to 
the  actual  demand,  which  should  always  regulate  the  supply, 
but  according  to  the  apparent  demand  which  is  thus  placed 
above  the  necessary  supply.     And,   although  it  may  delay 


2S4  dijncombe's  free  banking. 

the  exportation  of  the  precious  metals,  yet  this  is  of  slight 
iraportance,  since  it  does  not  increase  the  productive  wealth 
of  the  country,  that  being  the  only  true  source  of  profitable 
remittances — all  other  operations  being  merely  changers  in 
credits,  oi  alterations  in  the  quoted  exchanges,  Avithout  any 
real  change  in  the  exchanges. 

The  par  (Exchange  between  the  United  States  and  ]Ong- 
land,  under  the  original  law  establishing  the  mint,  an'l  au- 
thorising the  coinage  for  the  United  States,  passed  in  1 792, 
authorised  tho  coinage  of  silver  dollars,  of  the  value  of 
Spanish  milled  dollars,  to  contain  17  dwt.  8  grains  of  stan- 
dard silver,  and  that  tha  proportions  that  gold  and  silver 
should  bear  to  each  other  should  be  as  one  to  fifteen,  that  is, 
one  ounce  of  pure  gold  should  be  worth  fifteen  ou  nces  of 
pure  silver. 

However,  by  an  act  of  congress,  in  1789,  the  pound 
sterling  was  declared  to  be  worth  four  Spanish  silver 
dollars  and  forty  four  hundredth  parts  of  a  dollar,  in  the 
estimating  ad  valorem  duties  upon  British  merchandise 
at  our  custom  houses.  By  later  computations,  it  appears 
that  the  computed  value  of  a  pound  sterling  at  $4,4444, 
was  below  the  par  at  the  time — the  true  par  having  been 
found  by  later  calculations  to  be  S4,5657,  which  was  2^  per 
cent,  above  the  computed  par.  By  the  acts  of  1832,  1834 
and  1837,  the  British  sovereign  (the  pound  sterling,)  has 
been  made  equivalent  to  S'4,8665,  equal,  v/ithin  a  fraction, 
to  9  J  per  cent,  premium  on  the  old  computed  par,  which  is 
the  true  par  on  London  under  the  present  laws. 

Previous  to  the  passage  of  what  is  called  the  gold  bill 
in  the  year  1834,  the  eagle  contained  24  7  J  grains  of  pure 
gold.  By  that  act,  and  by  the  act  of  1837,  the  eagle  is 
made  to  contain  232^  grains  ol  pure  gold;  and  one  ounce 
of  pure  gold  is  made  equal  to  sixteen  ounces  of  pure  silver. 


buncombe's  free  banking.  235 

The  prices  of  bills  of  exchange  show  the  state  of  the  trade 
between  two  countries ;  yet,  strictly  speaking,  exchange 
in  its  operation  has  relation  only  to  the  precious  metals, 
A  bill  of  exchange  is  merely  an  order  for  the  delivery  of  a 
given  quantity  of  one  of  the  precious  metals,  at  a  given  time 
and  place,  dignified  by  the  name  of  "a  bill  of  exchange," 
and  magnified  and  mystified  by  special  legislation  and  by 
financial  usages  and  customs,  until  a  few  persons  only  at- 
tempt to  comprehend  it.  I  have  just  shown,  that  the  par 
exchange  between  England  and  the  United  States  is  about 
9J  per  cent,  premium  above  the  old  computed  par.  This  is 
well  understood  by  commercial  men  ;  but  yet  they  will 
not  reduce  their  table  and  ordinary  computation  of  the  ex- 
changes to  that  par,  and  publish  the  difference,  which  would 
show  the  real  rate  of  exchange — but  all  questions  of  finance, 
banking,  currency,  and  exchanges,  must  still  be  invol- 
ved in  some  mystery,  otherwise  the  influence  of  money 
would  be  lessened  if  not  rednced  to  its  actual  worth,  and 
value  ;  and  there  would  be  another  principle  of  equality 
developed  by  the  American  government.  To  do  this,  all 
that  appears  indispensably  necessnry,  would  be  to  quote  the 
exchange  on  London  in  dollars  and  cents  foi  the  pound 
sterling,  instead  of  designating  the  per  centage  above  or  be- 
low par,  according  to  the  old  computation.  Tlds  might  be 
done  by  subtracting  the  par  premium  on  the  sterling  pound, 
according  to  the  old  computation,  from  the  rate  exhibited, 
when  the  rate  of  exchange  exceeds  that  amount;  and  sub- 
tract it  minus  that  amount  when  it  is  below  that  amount. 
This  would  make  the  quotation  quite  clear  and  intelligible 
to  every  reader. 

If  the  par  value  of  the  pound  sterling  be  '$4,5665,  and 
the  rate  of  exchange  should  be  so  much  in  favor  of  the 
United  States  as  to  reduce  it  to  9^  per  cent.,  that  is,  to  the 


236  duncombe's  free  banking. 

old  computed  par,  it  should  be  quoted  at  $4,4444,  or  at  9  J 
per  cent,  discount,  instead  of  being  quoted  at  par,  as  it 
would  be  according  to  the  present  practice  ;  by  which  the 
subject  is  mystified,  and  the  attentive  and  superficial  obser- 
ver misled  into  a  belief,  that  the  imports  and  exports  of 
the  country  were  equal,  that  is,  that  the  total  amount  of 
American  exports  were  equal  to  the  total  amount  of  their 
imports,  and  that  a  merchant  in  New  York  can  purchase, 
with  an  ounce  of  pure  gold,  or  an  ounce  of  pure  silver,  a 
bill  on  England,  which  will  entitle  him  to  receive  in  Eng- 
land, an  ounce  of  pure  gold  or  an  ounce  of  pure  silver. 

By  the  laws  of  the  United  States,  British  gold  and  silver 
coin,  of  full  weight  and  standard  fineness,  are  receivable  in 
the  payment  of  duties,  at  about  the  value  of  their  amount 
of  pure  gold,  or  pure  silver,  when  coined  at  the  American 
mint. 

When  exchange  is  at  par,  the  English  merchant  at  Liv- 
erpool or  London,  with  a  given  sum  of  British  standard 
gold,  or  standard  silver  coins,  can  purchase  a  bill  upon 
New  York  that  will  entitle  him  to  receive  from  the  drawee 
of  the  bill  in  New  York,  a  like  sum  of  British  standard 
gold,  or  silver,  or  its  equivalent  in  American  gold  or  silver. 
The  coins  of  full  weight  and  fineness  of  the  two  countries, 
which  are  the  respective  equivalents  of  an  ounce  of  pure 
silver,  or  an  ounce  of  pure  gold,  or  of  the  standard  fineness 
of  British  silver  or  gold  will  express  that  par. 

The  injury  that  would  be  done  to  domestic  and  foreign 
exchanges,  by  an  incorporated  United  States  bank  and 
branches,  doing  the  whole  banking  business  of  the  country, 
can  only  be  comprehended,  by  supposing  a  mercantile 
company,  chartered  to  promote  commerce,  (nominally,)  i 
with  the  exclusive  privilege  of  regulating  the  length  of  the  " 
yard-stick  and  shortening  it  again  at  their  pleasure,  and  of 


BUNCOMBE  S  FREE  BANKING*  237 

increasing  or  lessening  the  weight  or  measure  of  the  pound 
or  bushel  to  suit  their  private  interest  and  convenience,  un- 
der pretext  of  their  being  better  able  to  compete  in  prices 
with  European  dealers,  they  must  be  allowed  to  buy  36 
inches  for  a  yard,  and  sell  at  any  smaller  number  of  inches 
for  a  yard,  that  they  might  find  it  to  their  interest  to  use. 
So  a  United  States  bank  and  branches  may  expand  the  cur- 
rency when  and  where  she  wishes  to  sell  exchanges,  and 
contract  it  at  such  times  and  places  as  she  wishes  to  purchase 
bills  of  exchange  again. 

This  was  loudly  and  bitterly  complained  of  in  the  old 
United  States  bank  ;  but  the  situation  of  our  foreign  com- 
merce and  domestic  credits  is  such,  that  the  commercial 
evils  would  be  quadrupled  by  such  a  system  at  this  time. 
Our  domestic  commerce  is  greatly  increased,  and  the  amount 
of  remittances  from  one  part  of  the  country  to  another, 
through  bills  of  exchange,  is  proportionately  enlarged  ; 
while  our  remittances  to  foreign  countries  have  become 
immense,  both  on  account  of  the  greatly  increased  amount 
of  importations  of  British  merchandise,  and  on  account  of 
the  immense  national  or  states  debts  that  must  be  paid. 
Alas  1  how  much  of  all  this  evil  is  to  be  attributed  to  the 
accumulation  of  bank  credit,  owing  to  their  li?nited  respon- 
sihiUty,j)rwate  iyttei'est  and  2)olitical  ambition. 

The  advantages  of  chartered  bank  paper  have  been  dear- 
ly bought,  by  bank  expansions,  contractions  and  suspen- 
sions, and  consequent  fluctuations  in  prices  and  business ; 
although  chartered  banks,  by  the  laws  of  their  own  situa* 
tion,  (being  chartered  and  established  for  the  express  pur- 
pose of  making  as  much  money  upon  a  small  capital,  with  a 
fictitious  legal  credit,  out  of  the  government  and  out  of  the 
people,  as  they  lawfully  can,)  must  either  secretly  combine 
to  aid  each  other,  as  they  thereby  most  positively  assist  them- 
u 


238 

selves,  or,  having  a  similatrity  of  interests  act  similarly  in 
their  contractions  and  expansions,  and  in  the  prices  they 
pay  far  bills  of  exchange,  and  in  their  charges  for  remittan- 
ces, a  similarity  of  constitution,  an  identity  of  interest, 
with  equal  legal  powers  to  exercise^  must  produce  natural- 
ly the  same  results. 

Yet,  even  the  combined  action  of  a  great  number  of 
banks,  is  not  so  much  to  be  feared  as  the  immediate,  direct 
and  concentrated  action  of  one  large  bank  with  branches 
throughout  the  Union.  This  concentration  of  the  monied 
interests  of  the  country,  in  one  large  bank ;  its  monopoly 
of  the  finances  of  the  country ;  its  aristocratic  tendency 
and  influence  over  society  ;  with  its  power  to  control  the 
currency,  should  be  avoided  by  every  lover  of  liberty  and 
equality. 

The  influence  of  such  an  institution  must  be  greater  than 
that  of  all  the  other  elementary  principles  of  the  govern- 
ment combined  ;  whether  it  be  considered  in  a  commer- 
cial, political,  religious,  social  or  financial  point  of  view. 

That  portion  of  our  commercial  community  that  now 
want  an  increase  of  foreign  credit^  and  seek  it  through  the 
agency  of  a  United  States  bank,  would  be  the  very  first  to 
suffer  from  its  influence  j  for  being  the  first  among  its  debt- 
ors, as  soon  as  the  business  of  the  bank  had  become  gener- 
al, and  the  state  institutions  had  been  swallowed  up  by 
that  leviathan,  and  the  needy  supplicant  for  loans,  or  for 
bank  credit  had  been  accommodated  until  nothing  more 
could  be  made  from  his  business,  until  he  had  paid  up  his 
previous  loans,  other  "  fatter  clients"  will  offer^  and  the 
"lean  kine"  will  be  turned  away  as  hungry  as  they  came. 

The  merchant,  who  wants  one  great  bank  for  the  greater 
convenience  of  foreign  or  domestic  remittances,  forgets  that 
as  he  increases  the  Credit  of  one  institution  he  lessens  the 


duncombe's  free  banking.  239 

credit  of  others,  and  tbat,  while  he  more  effectually  secures 
the  prompt  punctual  payment  of  the  drafts  of  this  bank  in 
London  and  extends  its  credits  abroad,  that  this  is  only 
temporary  relief,  and  that  the  greater  the  expansion  the  more 
severe  the  contraction  will  be,  that  must  inevitably  fol- 
low it. 

And  that  as  soon  as   such  an  institution  shall  be  once  in 

complete  operation,  it  would  have  the  power  to  regulate 
the  rate  of  interest  on  money,  the  price  of  remittances,  and 
the  amount  of  currency  that  should  circulate,  for  the  pre^ 
cious  metals  would  all  be  in  its  vaults.  The  law3  make 
the  eoins  of  several  other  countries  besides  our  own  law- 
ful tender,  some  of  which  pass  by  tale  and  some  of  them 
by  weight.  And  when  the  prices  asked  by  the  bank  for  bills 
the  merchant  thought  too  high,  and  he  should  ask  specie  to 
remit  himself,  instead  of  buying  a  bill  of  exchange,  the 
banker  if  Ite  gave  him  specie,  could  pay  him  in  such  for- 
eign coin,  as  would  only  pass  as  bullion  at  a  loss  in  the  mar- 
ket to  which  he  might  desire  to  send  it ;  or  he  might  give 
him  light  American  coins,  that,  not  having  been  called  in 
by  the  mint,  are  still  lawful  tender — small  pieces  that  are 
very  inconvenient  to  the  remitter — so  that  although  the  bank 
may  promptly  meet  the  demand  for  specie,  yet  the  receiver 
would  find  that  the  additional  half  per  cent,  that  the  bank 
asked  him  for  the  draft  more  than  he  thought  it  worth,  was 
etill  cheaper  and  better  for  him  to  pay,  than  to  receive  the 
fipecie  which  he  must  take,  if  he  drawed  the  specie  from  the 
bank  for  remittances  against  the  pleasure  of  the  banker. 
And  tbe  bank  now  having  the  whole^  sole,  and  entire  con- 
trol of  the  exchanges,  as  well  as  the  currency,  it  would  be 
in  vain  to  remonstrate  against  the  imposition.  The  only 
avenue  to  the  good  graces  of  a  bank  is  always  through  their 

interest :  when  they  have  power  they  invariably  exer- 
cise it. 


240  buncombe's  free  banking. 

Besides  this,  men  in  business,  dependant  upon  bank 
credit,  find  that  they  are  required  silently  to  submit  to  many 
inconveniences  and  impositions,  by  the  directors,  or  loose 
the  benefits  of  their  bank  credit ;  and  having  extended  their 
business  upon  that  credit,  it  would  be  nearly  fatal  to  the 
credit  merchant,  to  be  deprived  of  a  credit  at  the  bank, 
when  there  is  no  other  institution  in  the  country  from 
which  one  dollar  can  be  borrowed.  Hence  they  may  bet- 
ter quietly  pay  the  bank  a  higher  price  for  a  bill,  a  premium 
that  would  twice  cover  the  expense  of  exporting  specie, 
than  loose  their  credit  at  the  bank.  These,  however,  are 
but  a  tythe  of  the  financial  evils  that  must  inevitably  flow 
from  the  creation  of  a  national  bank  ;  not  to  allude  to  it  as 
the  positive  foundation  of  a  national  debt. 

The  tendency  of  the  precious  metals  to  go  abroad,  is  the 
only  permanent  and  absolute  check  upon  over-trading ;  for 
prudent  men  will  not  import  more  than  they  can  sell,  nor 
more  than  they  can  pay  for ;  and  where  exchange  is  not  in- 
interfered  with,  by  artificial  means,  this  of  itself  will  regu- 
late the  amount  of  our  importations,  and  the  amount  of  our 
domestic  sales. 

The  charge  against  my  proposition,  of  issuing  more  paper 
to  circulate  as  money  than  the  amount  of  specie  in  the 
vaults  of  the  bank,  giving  the  proposed  bank  paper  a  cred- 
it character,  and  thereby  overthrowing  the  arguments  used 
in  its  favor,  have  been,  I  trust,  satisfactorily  answered  so 
far  as  the  exchange  is  concerned,  in  rendering  bank  notes 
always  perfectly  convertible. 

I  hope  I  have  made  it  clear  to  the  understanding  of 
every  disinterested,  well-constituted  mind,  that  the  natural 
tendency  of  coin  to  leave  the  countrv,  when  not  artificially 
interfered  with,  will  control  importations  and  check  over- 
trading J  that  if  the  directors  of  the  banks  had  no  interest 


DUNCOMBfi's  FREE  BANKING.  241 

in  the  dividends  or  discounts  of  the  banks,  they  would  not 
depart  from  the  legal,  regular,  sound,  healthy  business  of 
banking  (that  of  lending  money,  by  discounting  regular  bu- 
siness paper,  having  but  a  short  time  to  run,)  to  interfere 
with  exchanges ;  and  that,  consequently,  the  exchanges 
being  left  to  private  competition,  would  always  indicate  the 
balance  of  trade,  while  private  bills  could  be  bought  cheap- 
er by  remitters  from  competing  individual  venders  in  the 
bill  market,  than  they  would  be  likely  to  be  purchased  from 
banks. 

It  has  been  suggested,  that  the  old  practice  of  the  Cana- 
da banks,  of  endorsing  or  guaranteeing  bills,  was  prefer- 
able to  the  present  practice  of  banks  dealing  in  bills. 

The  endorsement  undoubtedly  benefitted  the  bill-holder 
where  strict  convertibility  was  desired ;  but  it  is  a  depar- 
ture from  the  duties  of  the  bank  of  very  doubtful  expe- 
diency. 

According  to  the  system  of  banking  here  recommended, 
the  whole,  sole  and  entire  business  of  the  bank  should  be 
to  lend  money  by  discounting  actual  business  paper,  having 
but  a  short  time  to  run,  and  thereby  furnishing  a  convenient, 
perfectly  convertible  money-currency,  to  make  up  the  defi- 
ciency of  the  precious  metals,  and  nothing  mure. 
-•  The  invariable,  perfectly  uniform  convertibility  of  bank 
paper  is  all  that  is  desired  in  a  circulating  medium  to  give 
it  a  metalic  character ;  and  our  system  of  currency  should 
never  admit  of  the  issue  of  one  dollar  more  of  paper  than 
possessed  the  metalic  character  perfectly,  as  could  be  prov- 
ed on  all  occasions  by  being  freely  exchanged  for  silver  or 
gold,  at  sight  at  the  counter  where  it  was  issued. 

But,  if  we  succeed  in  showing,  that  the  currency  em- 
ployed in  foreign  trade,  bears  no  greater  proportion  to  the 
whole  amount  of  "  medial  commodity"  circulating  in  the 


242  buncombe's  fbee  banking, 

country,  than  the  amount:  of  capital  engaged  in  foreign 
trade  bears  to  the  whole  amount  of  capital  employed  in  ag- 
riculture, manufactures,  and  in  domestic  commerce  in  the 
country,  we  shall  have  a  data  by  which,  in  some  measure, 
we  shall  be  able  to  judge  of  what  amount  of  paper  and 
what  amount  of  specie  must  always  be  freely  exchan<yed 
for  each  other,  to  render  the  currency  of  the  country  easy, 
and  yet,  not  to  inflate  it  so  as  to  lead  to  its  exportation,  per- 
fectly to  supply  the  demand  for  currency,  but  not  to  sur- 
charge the  channels  of  circulation.  Although  this  may  not 
be  doubted,  the  data  upon  which  this  hypothesis  is  predi- 
pated  may  not  be  uninteresting  by  and  bye. 

That  bank  paper,  intended  to  circulate  as  money,  may 
not  acquire  a  credit  character,  and  ultimately  become  in- 
convertible ;  prevent  any  artificial  interference  >yith  the 
precious  metals,  by  which  their  free  circulation  and  exporr 
rtation  should  be  restrained. 

Circulate  bills  of  no  smaller  denomination  than  is  con- 
venient for  all  classes  of  society. 

Circulate  no  bills  of  smaller  denominations  than  those 
which  circulate  freely,  as  money,  in  the  countries  with 
which  our  commerce  is  principally  carried  on  ;  that  balanr 
ces  of  trade,  may  always  be  correctly  indicated  by  the  ratq 
of  exchange,  and  the  excessess  checked,  by  the  free  circula- 
tion of  the  precious  metals  from  one  country  to  another. 

Separate  the  banks  of  issue  perfectly  from  the  banks  of 
discount,  so  that  the  discounts  may  be  made  automatically 
upon  the  specie  actually  in  the  vaults  of  the  bank  at  the 
time  of  the  discount,  always  fully  supplying  the  actual  dcr 
mand,  and  never  exceeding  it. 

Separate  the  currency  from  politics,  by  removing  from 
the  congress  and  states'  legislatures  the  necessity  of  incorr 
porating  banking  companies,  increasing  their  capitals,  r^^ 


buncombe's  free  banking.  243 

Bewmg  their  charters,  or  in  any  manner  interfering  with 
the  bank  paper  portion  of  the  circulating  medium;  and 
placing  the  control  of  the  currency  in  the  hands  of  the  peo- 
ple, through  financiers  elected  by  themselves  expressly  for 
that  purpose,  thereby  preventing  the  infamous  contractions 
and  expansions  of  bank  issues  to  serve  private  or  political 
party  purposes. 

Separate  private  interest  from  the  creation  or  circulation 
of  that  part  of  the  currency,  that  consists  of  bank  paper, 
as  perfectly,  wholly,  and  entirely  as  it  is  separated  from  the 
operations  of  the  mint,  that  coins  the  precious  metals. 

Render  the  currency  republican,  by  authorising  the  peo^ 
pie,  by    act  of  congress,  to   elect   competent  financiers  to 
supervise  and   regulate  the  currency ;  who  should  be  re- 
sponsible to    the  public  for  the  faithful  discharge  of  their 
duties,  as  the  directors  of  the  political  machinery  of  the 
government  are  elected  and  responsible  through  the  ballot- 
box  ;  making  it  the  private  interest  of  every  director,  desi- 
rous of  popular   favor,   or  of  being  re-elected,  to  study  to 
promote  the  interest  of  the  greatest  number  of  his  constitu- 
ents— by  rendering  and  preserving  the  stability  and  sound- 
ness of  the  currency  unquestionable — by  keeping  the  bank 
accounts  and  monthly  statements,  intended  to  be  published, 
mathematically  correct — and  by  zealously  promoting  the 
accommodation  and  convenience  of  the  whole  community. 
TJie  directors  of  the  banks  of  discount,  being  subject  to 
the  advice  and  direction  of  the  state  directors,  as  the  states 
.directors  are   to   the   United  States   directors^ — each  and 
every  one  of  them  giving  good  security  for  the  faithful  dis-- 
charge   of  their  trusts  ;  and,  to  prevent  the  possibility  of 
their  becoming  interested  in  the   discounts,  all  directors 
should  be  precluded  from  the  privilege  of  discounting  pa? 
per,  in  which  a  director  has  any   interest,  either  in  the  dis*- 
^ount  or  in  the  re-payment  of  the  money. 


244  duncombe's  free  banking. 

Banks  of  discount  should  publish  monthly  statements  of 
their  business,  that  the  people,  whose  servants  they  are, 
and  whose  currency  they  are  elected  to  regulate  and  direct, 
may  well  understand  the  state  of  the  monetary  aifairs  of 
the  country. 

When  the  directors  of  a  bank  of  discount  are  interested 
in  common  with  the  inhabitants  of  the  place  in  the  conver- 
tibility of  the  currency,  and  in  the  general  prosperity  of  the 
place,  and  when  they  can  by  no  possibility  have  an  oppo- 
site interest  from  that  of  the  community,  they  will  be  likely 
to  do  their  duties  faithfully ;  being  also  restricted  from  deal- 
ing in  exchanges  for  the  profit  of  the  business,  or  in  ma- 
king their  notes  payable  at  a  distant  place,  with  a  view  o£ 
profiting  by  the  exchange. 

The  business  of  every  local  bank  will  be  conveniently, 
principally  confined  to  the  discounting  business  notes  of  the 
regular  traders  and  residents  of  the  place  where  the  bank  is 
located ;  making  the  payments  due  and  payable  on  the 
spot  and  not  elsewhere,  for  the  sake  of  an  increase  of  divi- 
dends. Then  and  not  until  then,  will  the  thinking  class  of 
citizens  desire  to  confine  the  operations  of  the  banks  to  their 
proper  legitimate  business — that  of  lending  money,  by  dis- 
counting actual  business  paper,  having  but  a  short  time  to 
run. 

The  frequently  publishing  of  statements  of  the  banks,  to- 
gether with  the  reports  of  the  state  directors,  upon  their  ex- 
amination and  supervision  of  the  institutions,  will  enable 
the  public  to  understand  the  business  of  the  bank,  and  to 
approve  or  disapprove  of  the  various  measures  of  the  di- 
rectors. 

The  laws  and  regulations  established  for  the  guidance  of 
the  directors,  should  be  very  definite  and  explicit,  leaving 
but  slight  discretionary  power  with  them,  except  that  of 


buncombe's  free  BANKII^G.  ^45 

only  discounting  safe  and  secure  paper,  when  the  amount 
of  specie  in  their  vaults  justify  it. 

The  people'  would  then  become  familiar  with  currency, 
and  elect  only  such  persons  as  would  conduct  banking  upon 
the  true  principles  of  prudent  and  safe  banking,  making 
the  bank  paper  issued  only  sufficient  to  meet  the  demand 
for  currency,  above  the  amount  of  metalic  currency  in  cir- 
culation, for  all  the  small  business  of  the  country. 

This  will  more  effectually  prev^ent  the  expansions  of  the 
currency,  and  the  danger  of  its  imperfect  convertibility, 
than  could  be  expected  from  individual  liability  or  the  secu- 
rity of  public  debts  or  lands,  pledged  with  the  comptroller  of 
the  state  for  the  security  of  the  bill-holder,  as  under  the 
general  banking  law  of  the  state  of  New  York. 

The  people  are  always  right  in  their  cool  judgment,  and 
they  would  soon  learn  that  every  slight  expansion  of  bank 
issues  must  be  followed  by  triplicate  contractions ;  and 
that  paper  money,  although  when  strictly  convertible  may 
serve  as  a  convenient  currency,  while  it  is  the  actual  repre- 
sentative of  coin,  but  that  it  can  not  be  used  as  wealth  ; 
that  however  perfectly  soever  it  may  be  rendered  in  specie, 
it  still  is  not  specie,  nor  is  it  any  more  wealtli  than  it  is  spe- 
cie, consequently  its  true  and  only  business  is  as  the  repre- 
sentative of  specie  to  supply  the  deficiency  in  the  precious 
metals  in  this  country,  in  the  same  manner  as  bank  paper 
supplies  the  place  of  the  precious  metals  abroad.  Bank  pa- 
per has  truly  been  said  to  be  like  faith,  "  the  substance  of 
things  hoped  for,  and  the  evidence  of  things  not  seen." 

Circulate  bills  of  no  smaller  denomination  than  is  conven- 
ient for  all  classes  of  society,  so  that  those  w^ho  prefer  the 
precious  metals  may  always  hav^e  them,  not  only  from  their 
preference  to  them,  but  from  the  preference  for  paper  of 
those  who  have  inland  remittances  to  make,  or  who,  from 


246  duncombe's  free  banking. 

the  amount  of  the  business  they  have  to  transact,  find  large 
bills  preferable  to  them  for  specie. 

The  money  that  each  individual  prefers  will  be  retained 
by  him  as  long  as  he  has  other  money  that  will  circulate 
freely,  whether  it  be  the  precious  metals  or  bank  paper. 
That  the  precious  metals  will  not  circulate  indiscriminately 
with  bank  paper,  among  the  same  class  of  citizens,  at  the 
same  time,  is  evident,  from  the  fact,  that  every  man  retains 
the  money  he  prefers,  and  passes  that  which  is  the  least 
pleasing  to  him. 

Those  who  handle  but  a  small  quantity  of  money  gener- 
ally prefer  the  precious  metals,  especially  if  they  have  ever 
had  a  bill  that  they  had  received  at  par,  and  was  compelled 
to  loose  a  discount  on  it  upon  passing  it — (and  who  among 
that  class  of  citizens  has  not  ?) 

Men  in  large  business  prefer  bank  paper,  equally  current 
in  every  part  of  the  country,  and  always  convertible  into 
specie,  except  those  whose  business  in  trade  is  mostly  with 
farmers,  mechanics,  and  laborers.  They  prefer  the  pre- 
cious metals  as  more  convenient  change.  Farmers  prefer 
the  precious  metals  to  paper  money,  because  they  are  more 
secure  against  loss,  and  against  fire  ;  because  they  will  al- 
ways pass,  whatever  may  be  the  fluctuations  of  trade,  or  of 
currency,  and  because  they  sometimes  are  above  par,  but 
never  below  par.  Besides,  they,  as  well  as  mechanics, 
spend  less  money  for  useless  articles,  when  they  have  only 
gold  and  silver  by  them,  than  they  do  when  they  have  bank 
paper  of  doubtful  convertibility;  because  the  pleasure 
they  take  in  having  the  rich  gold  and  silver  coins  securely 
laid  by  them,  is  greater  than  the  pleasures  they  would  en- 
joy in  the  occasional  extra  bottle,  or  other  useless  luxury, 
especially  if  the  family  are  ill,  or  if  business  is  dull.  The 
family  too,  acquire  an  almost  instinctiye  attachment  for  spe"» 


BUNCOMBE'S  FREE  BANKING.  247 

cie,  that  is  left  in  their  care  for  some  time — it  becomes  an  al- 
most household  god  with  them,  and  they  feel  great  reluc- 
tance at  having  it  passed  ;  this  feeling  is  never  so  strong 
for  paper  money. 

Excessive  fondness  lor  shows  and  amusements  are  often 
induced  by  the  expansions  of  the  currency.  Men  with 
small  means,  from  finding  money  plenty  and  business  live- 
ly, for  a  length  of  time — fancying  that  such  times  will  al- 
ways continue,  indulge  in  luxuries  and  amusements,  that 
their  business  and  ordinary  circumstances  would  not  have 
warranted.  The  youth  are  left  without  a  knowledge  of  the 
useful  and  necessary  business  of  life,  and  without  a  correct 
knowledge  of  the  value  of  money,  to  read  novels,  dress, 
see  company,  and  learn  accomplishments — all  of  which  may 
have  their  proper  time  and  place,  but  which  but  illy  fit  the 
youth  of  our  country  for  our  western  wilds,  where  those 
who  understand  business,  and  are  honest,  sober,  tem- 
perate, economical  and  industrious,  are  certain  of  be- 
coming wealthy,  provided  they  keep  out  of  debt  and  live 
annually  within  their  income.  But  idleness  and  luxury 
will  render  our  young  men  effeminate,  and  our  young  wo- 
men vapid  ;  and  when  they  are  left  to  earn  their  own  bread 
by  industry,  they  will  find  that  they  are  neither  fit  associates 
for  laborers,  nor  men  of  sense,  and  that,  having  passed 
their  time  in  fanciful  amusements,  they  are  altogether  un- 
qualified for  the  important  duties  of  life^  which,  as  men  and 
women,  must  devolve  upon  them  in  a  few  days.  They 
have  lost  their  self-command,  or  rather  they  have  never 
learned  the  severe  art  of  self-government.  They  have  been 
flattered — they  became  vain  and  imperious  ;  they  are  now 
neglected,  and  they  become  peevish,  fretful,  and  morose,— 
being  unhappy  and  disappointed  with  every  thing  and  eve^ 
ry  body,   they  are  thus  left  fit  prey  for  the  first  coqiiette 


248  DUNCOMBE*S  FREE  BANKING. 

In  love,  or  black-leg  in  matrimony,  that  may  put  their  dis- 
tempered brains  at  work  to  ensnare  them. 

And  this  is  the  daily  and  hourly  consequence  of  limited 
RESPONSIBILITY  CHARTERED  BANK  PAPER !  Private  interest 
inflates  the  currency.  The  unwary  and  unsuspecting  fan- 
cy that  the  paper  that  they  receive  is  real  money — is  real 
wealth — but  they  ^vake  to  the  painful  reflection,  that  "  ill- 
luck  still  haunts  a  fairy  grot," — they  are  poorer  than  they 
were  before  they  went  to  the  bank  for  credit,  and  less  able 
to  pay  their  debts. 

Republicanism  is  plain,  honest,  homely,  healthy,  and  hap- 
py. Wealth  is  the  product  of  honest  industry  ;  it  is  sub- 
stantial, it  is  accumulating,  and  always  convenient  to  those 
who  have  earned  it,  and  know  its  value  ;  but  to  those  who 
do  not  know  its  value,  it  is  always  deficient,  it  is  sqander- 
ed,  and  is,  briefly,  nothing  better  than  want,  by  which  it 
must  and  will  assuredly  be  followed.  A  knowledge  of  the 
value  of  money  consists  in  a  knowledge  of  the  value  of 
pence.  Ten  dollars  in  one  bank  note  inspires  less  love 
of  money,  that  is,  it  is  spent  with  less  care  and  less  anxiety 
at  parting  with  it,  than  is  often  felt  in  parting  with  one  sil- 
ver dollar.  Coins,  like  old  friends,  are  often  preserved  as 
companions,  for  something  like  a  personal  regard  and  attach-  . 
mentthat  we  have  for  them,  by  which  we  retain  them  asil 
long  as  possible.  Bank  paper  is  like  agreeable  steam-boat 
or  stage  passenger  acquaintances — they  pass  current  with 
us  for  a  time,  but  leave  no  lasting  impressions  on  our  minds. 

The  preventing  the  circulation  of  small  bills,  and  leaving 
specie  to  occupy  their  places,  retains  a  much  greater  amount 
of  specie  in  the  country,  than  will  remain  under  bank  con- 
tractions, when  the  bauks  have  all  the  specie  in  their  vaults, 
and  the  power  to  dispose  of  it  as  they  choose. 

It  is  believed  that  currency  may  be  rendered  sound,  and 


duncombe's  free  banking.  249 

preserved  so  in  circulation,  mucli  more  easily  when  the  di* 
vision  between  the  specie  and  bank  paper  shall  be  so  estab- 
lished, that  every  class  of  community  may  have  the  medi- 
um that  he  prefers,  and  at  all  times  and  under  all  commer- 
cial or  financial  circumstances,  exchange  the  one  freely  for 
the  other. 

But  to  accomplish  this,  there  must  be  no  small  bills  ;  that 
those  who  have  the  paying  off  of  laborers,  and  the  purcha* 
sing  of  produce  from  the  farmers,  cannot  have  a  deprecia- 
ted currency  to  press  upon  them,  with  the  threat,  that  unless 
you  receive  this  currency  you  cannot  be  employed,  or  that 
you  cannot  sell  your  produce.  While  a  depreciated  small 
bill  currency  exists,  we  have  seen  that  it  will  be  circulated 
by  those  who  are  interested  in  the  passage  of  it,  and  by 
those  whose  necessities  compel  them  to  receive  it  in  busi- 
ness and  pay  it  out  again. 

It  is  true  that  paper  money  is  not  lawful  tender  in  the 
payinent  of  debts,  yet  it  is  virtually  so,  as  well  as  in  the 
payment  of  laborer's  wages,  and  in  the  purchase  of  the  far- 
mer's products. 

If  the  laborer  is  told,  you  must  take  paper  money  or  I 
cannot  employ  you,  with  him  paper  money  is  lawful  tender 
to  all  intents  and  purposes.  So  too  with  the  farmer  ;  if^ 
when  he  has  brought  his  produce  into  market,  and  is  told 
that  he  must  take  paper  money  or  not  sell,  by  every  purcha- 
ser, (as  every  farmer  would  be  told  who  should  ask  specie 
for  his  loading,)  to  him  paper  money  is  lawful  tender — ho 
must  receive  it  or  he  cannot  sell  his  load. 

This  must  naturally  be  the  situation  of  the  currency,  and 
of  the  business  of  the  country,  while  small  bills  are  allowed 
to  be  issued  and  circulated  as  money  by  incorporated  banks* 

Small  bills  drive  the  specie  out  of  the  market.  They, 
being  less   valuable  than    specie,    and  the:    bankers  haV- 


250  duncombe's  free  banking. 

ing  an  interest  in  their  circulation,  increased  by  their  fre- 
quent destruction  and  loss,  they  will,  by  them,  be  forced  in- 
to the  market,  while  specie  will  be  withheld  from  circula- 
tion. 


CHAPTER  XXXVIII. 

ON  THE  CONVERTIBILITY  OF    BANK   PAPER  J    AND  ON  BRITISH 
POLITICS. 

A  summary  of  the  means  by  which  bank  paper  may  be  prevented  from  acquiring 
a  credit  character,  and  becoming  ultimately  inconvertible. — The  government  of 
Great  Britain. 

The  currency  of  the  country  may  be  rendered  sound  by 
the  following  means  : 

Firstly  :  By  removing  nil  artificial  restrictions  upon  the 
circulation  of  specie,  and  more  especially  Tipon  its  exporta- 
tion ;  leaving  the  exchanges  truly  to  indicate  the  balance  of 
trade,  and  the  propriety  of  increasing  or  lessening  importa- 
tions. 

Secondly  :  Circulate  no  bills  of  smaller  denominations 
than  accommodate  all  classes  of  community  ;  providing 
large  bills  for  men  engaged  in  extensive  business,  and  spe- 
cie for  farmers,  mechanics  and  laborers,  and  all  that  class  of 
society  that  prefer  the  specie  to  bank  paper. 

Thirdly  :  Circulate  no  billls  smaller  than  the  smallest 
that  circulate  in  foreign  countries  with  which  our  commerce 
is  principally  carried  on,  that  the  balances  of  trade  may  be 
indicated  by  the  exchanges,  and  duly  checked  by  the  expor- 
tation of  coin  when  excessive. 

Fourthly  :  Separate  the  banks  of  discount  from  the  banks 
of  issue,  so  that  discounts  may  be  made  automatically  upon 


duncombe's  free  banking.  251 

the  specie  actually  in  the  vaults  of  the  banks  at  the  time  of 
the  discount. 

Fifthly  :  Separate  the  currency  from  politics,  by  remo- 
ving the  necessity  for  legislative  interference  with  banks,  or 
currency  ;  and  organizing  the  people  to  regulate  their  banks 
and  their  issues  to  meet  the  actual  demand  for  currency. 

Sixthly  :  Separate  private  interest  from  the  issues  or  cir- 
culation of  bank  paper,  as  fully  and  perfectly  as  it  is  sepa- 
rated from  the  operations  of  the  mint. 

Sevewthly  :  Require  monthly  bank  statements  of  the  bu- 
siness of  the  banks,  full  and  complete,  to  be  published  for 
public  inspection,  and  for  the  supervision  of  state  directors, 
that  all  the  operations  of  the  banks  may  be  approved  or 
disapproved  by  the  people  through  the  ballot-boxes.     And 

Lastly  :  Render  the  currency  of  the  country  republican, 
like  the  other  elementary  principles  of  the  government,  by 
giving  the  people  the  election  of  the  directors  as  they  elect 
the  most  numerous  branches  of  their  legislatures.  That  it 
shall  be  the  interest  of  the  directors  to  promote  the  general 
public  good,  and  not  the  private  interest  of  the  stockhol- 
ders alone,  as  it  is  at  present. 

A  strict  conformity  to  these  regulations,  with  such  other 
minor  checks  and  balances  as  might  be  indicated  by  experi- 
ence, it  is  thought  would  completely  change  the  character 
of  paper  money,  and  render  it  always  perfectly  convertible 
at  sight,  and  equally  current  in  every  part  of  the  U.  States. 

Having,  as  I  trust,  answered  the  objections  made  to  the 
proposed  plan  of  a  mixed  currency,  consisting  of  specie 
for  the  ordinary  business  of  the  country,  and  large  bills  for 
those  who  prefer  them  for  commercial  purposes,  lest  the  cir- 
culation of  more  paper  than  there  is  specie  in  the  vaults  of 
the  bank  should  give  it  a  credit  character,  and  ultiinately 
render  its  convertibility  doubtful ;  and  having  illustrated  the 


252  duncombe's  fhee  banking, 

advantages  that  must  arise  to  the  whole  nation  collectively, 
as  well  as  the  citizens  in  their  private  capacities,  I  now  pro- 
ceed to  the  examination  of  the  currency  generally ;  but, 
perhaps,  I  ought  firstly  to  remark,  that  I  anticipate  the  in- 
troduction of  specie  into  common  circulation  would  be  slow, 
and  for  some  time  retarded  by  the  continuance  in  circula- 
tion of  the  small  bills  of  the  chartered  banks  until  their  char- 
ters shall  have  expired. 

But  when  investments  in  one  general  United  States  hank 
stock  shall  have  been  found  to  be  more  profitable,  to  pay  a 
larger  dividend,  and  be  less  liable  to  change  and  deprecia- 
tion, than  the  stocks  of  private  banking  companies,  capital- 
ists will  readily  and  promptly  change  their  investments  from 
private  fluctuating  stocks,  to  permanent  national  funds; 
freed  from  the  anxiety  attendant  upon  the  financial  or  polit- 
ical changes  that  are  daily  occurnng,  both  in  Europe  and 
America,  by  which  the  dividends  of  banks  and  the  value  of 
stocks  are  rendered  so  uncertain  and  fluctuating,  and  as  the 
small  bills  disappear  one  after  another,  under  a  healthy 
state  of  the  currency,  specie  will  appear  simultaneously  as 
if  by  magic.  Small  bills  and  specie,  we  have  before  seen, 
cannot  circulate  at  the  same  time  among  the  same  commu- 
nity ;  because  the  poorer  n?>aterial  is  invariably  first  offered 
in  the  market.  Hence  credit  bank  bills  perform  all  the  du- 
ties of  the  currency,  of  which  they  are  capable,  to  the  ex- 
tent to  which  they  exist  in  community.  If  you  would 
check  their  circulation,  they  must  be  withdrawn  orcalled  in 
altogether,  as  they  will  occupy  the  small  channels  of  cur- 
rency against  the  desire  of  the  holder,  as  long  as  they  are 
permitted  to  remain  afloat. 

The  national  debt  of  Great  Britain,  as  I  have  elsewhere 
explained,  contains  the  strength  of  the  nation — securing  the 
wealth  of  the  kingdom  in   support  of  the  government,  by 


DtJNCOMBE^S  rJtfifi  BANKING.  253 

uniting  tii6  private  interests  of  the  fund-holders  to  the  pub- 
lic interests  of  the  empire. 

Every  fund-holder  has  a  direct  interest  in  the  support  of 
the  government  of  G-reat  Britain  to  the  amount  of  the  funds 
he  holds  :  and  hence  the  fact  that  the  irredeemable  national 
debt  of  oe800,000,000  sterling,  is  become  the  capital  of 
the  kingdom,  and  the  perpetual  bond  of  union  between  the 
government  and  the  governed.  Self-love — private  inter- 
est-^is  the  ruling  passion ;  at  whose  shrine  all  the  nations 
of  the  earth  bow — forgetting  patriotism,  philanthropy,  and 
the  love  of  oiFspring,  in  the  enjoyment  of  present  ease  and 
luxury  :  they  consign  posterity  to  ruin,  wretchedness  and 
woe,  sooner  than  deprive  themselves  of  the  gratifications  of 
to-day. 

The  fund-holders  have  no  voice,  and  exercise  no  influ- 
ence or  control  over  the  management  of  the  funds.  They 
receive  their  dividends  regularly ;  their  stock  is  always 
perfectly  convertible  into  specie  at  will :  and  therefore,  the 
public  confidence  is  kept  secure  by  the  punctual  payment 
of  the  interest  on  quarter  days. 

I  am  desirous  of  interesting  American  capitalists  in  fa- 
vor of  the  republican  government  of  these  United  States, 
to  the  same  extent  through  'private  interest^  that  capitalists 
in  England  are  directly  interested  in  support  of  the  govern- 
ment of  Great  Britain  ;  but  by  not  exactly  the  same  means-^ 
not  by  a  national  irredeemable  deht — not  by  making  the 
government  of  my  country  Insolvent,  or  independent  of 
the  people,  who  would  then  be  compelled  by  standing  ar- 
mies to  support  it,  whether  it  was  satisfactorily  administer- 
ed or  otherwise  ;  but  by  giving  the  whole  people  a  sound 
currency  entirely  subject  to  their  own  regulation,  and  capi. 
talists  a  safe,  profitable  convertible  investment,  constituting 
a  source  of  real  wealth,  connected  with  the  .currency,  and 


254  duncombe's  free  banking, 

as  perpetual  as  the  other  elementary  principles  of  the  gov- 
ernment. 

The  stocks  of  this  institution,  being-  always  themselves  as 
convertible  as  the  funded  debt  of  Great  Britain  is,  would 
become  so  much  convertible  capital  stock  in  the  hands  of  the 
stockholders — being  productive  wealth  while  in  hand,  and 
money  in  the  market  whenever  the  exchange  is  desirable. 
Capitalists  would  have  greater  confidence  in  the  p(;rma- 
nence  and  stability  of  funds  based  upon  specie,  connected 
with  a  government  the  choice  of  a  whole  people,  than  can 
be  felt  in  a  government,  however  strong  in  its  fortresses,  ar- 
my and  navy,  in  King,  Lords  and  Commons,  Church  and 
State  Union,  in  bank  and  government  connection,  when  the 
wealth  of  the  nation  only  constituted  the  bond  of  union, 
and  v/hen  the  titled  pensioner  and  the  dignitied  churchman, 
who  live  upon  the  hard  earnings  of  the  masses,  are  but  a 
tythe  of  the  population,  where  fixed  bayonets  enforce  the 
laws,  and  where  moral  obligations  are  of  no  force. 

Besides  this,  every  man  acquainted  witli  the  political  his- 
tory of  England,  for  the  last  twenty  years,  has  seen  the 
House  of  Lords,  with  its  bishops  and  other  church  dignita- 
ries and  dependants,  as  violent  in  their  opposition  to  the 
several  whig  administrations  of  modern  times,  although  they 
profess  to  be  whigs  of  the  Pitt  school,  as  was  Pitt  to  the 
administrations  of  North  and  Bute.  These  several  admin- 
istrations, down  to  the  present  long  Melborne  udministrar 
tion,  are  evidently  each  more  liberal  and  more  enlightened 
than  its  predecessors,  yet  evidently  far  behind  the  advance 
of  intelligence  and  the  wants  of  the  people. 

If  tke  term  tory  signifies  one  in  office,  who  supports  a 
pkurch  and  state  union,  the  levying  and  collecting  the  reve^ 
nues  necessary  for  the  support  of  the  government  from  the 
I  hor  and  industry  of  die  produ£er,s,  rather  than  from  thi? 


duncombe's  free  banking.  255 

wealth  of  the  country,  then  the  present  administration  is  as 
truly  tory  as  its  predecessors. 

The  political  revolutions,  as  they  have  been  termed,  that 
liave  occured  in  England  within  the  last  twenty  years,  the 
catholic    emancipation  law,  and  the  reform  law,  have  only 
changed  the  classes  of  persons  who  exercise  and  enjoy  po- 
litical and  civil  privileges,  and  not  the  persons  themselves. 
True,  the  boroughs  owned  by  a  few  gentlemen  have  been 
disfranchised,  and  the  representation  given  to  a  more  extend- 
ed district  of  country,  and  to  a  greater  number  of  electors, 
yet  the  latter  are  as  dependant  upon  the  Lord  of  the  Manor, 
as  were  the  citizens  of  a  borough  upon  its  proprietor.    The 
same  men  may  be  still  elected,  as  well  by  the  ten  pound 
electors  of  a  district,  as  they  could  formerly  by  the  depend- 
ants upon  a  borough.     The  same  leading  principles  prevail 
as  formerly.  The  landlords  nominate  and  cause  to  be  elect- 
ed whomsoever  they  please,  to  continue  the  same  leading 
principles — the  connection  of  the  church    and  state — the 
raising  the  revenue  upon  the  labor,  and  not  upon  the  wealth 
of  the  kingdom — and  the  right  of  the  few    to  govern  the 
many,  with  the   necessity  of  the    many  to  obey  the  few. 
This  may  be  now  done  with  more   liberality  perhaps,  in 
some  respects   than  formerly  ;  yet  with   the  same  ultimate 
object,  that  of  keeping  the  laboring  classes  poor  and  igno- 
rant, that  they  may  be  easily  governed ;  and  of  increasing 
the  power  and  wealth  of  the  wealthy,  that  they  may  gov- 
ern with  certainty,  security,  and  ease  to  themselves,  with- 
out having  any    common   feeling  for,  or  interest  with   the 
governed. 

By  these  changes  (for  they  can  be  called  nothing  else,) 
the  people  have  gained  new  masters,  without  gaining  im- 
portant  principles.  Wealth  and  not  numbers  still  govern. 
The  funded  debt  still   contiijues  the  bond  of  indissoluble 


256  duncombe's  free  banking. 

union  between  the  wealth  and  wealthy  of  the  kingdom  and 
the  government,  while  fully  four-fifths  of  the  producers 
and  tax-payers  exercise,  in  fact,  no  independent  influence 
in  the  representation. 

Had  not  the  great  aristocracy  of  wealth  been  secure, 
even  the  love  of  power  and  desire  of  office,  would  have 
been  insufficient  to  have  produced  among  the  wealthy  (the 
only  truly  powerful  class  after  all,)  its  advocates  and  de- 
fenders. The  aristocracy  of  wealth  and  the  Lords  contest- 
ed the  passage  of  these  measures  inch  by  inch,  as  they  were 
being  matured  and  passed  into  laws,  and  only  finally  consen- 
ted  to  their  passage  after  the  amendments  by  the  Lords  had 
permanently  secured  wealth  and  not  numbers  to  be  the  ba* 
sis  of  representation. 

Heretofore  old  tory  families  controlled  the  House  of  Com- 
mons, tlirough  their  nominees  from  the  boroughs.  The  whigs, 
finding  their  power  over  the  manufacturing  and  some  of 
the  agricultural  districts  greater  than  that  of  the  tories,  de^ 
termined  to  disfranchise  the  old  boroughs,  and  give  the 
members  to  districts  over  which  they  had  influence.  They 
secretly  stimulated  the  people — they  occasionally  headed 
jthe  populace — they  aiforded  them  protection  from  the  in- 
fluence of  tory  magistrates  and  police  officers,  and  obtained 
the  passage  of  these  important  laws,  by  which  they  secu* 
red  their  seats  in  the  cabinet  and  their  continuance  in  power, 
as  they  are  very  equally  balanced  between  the  radicals  on 
the  one  hand,  and  the  tories  on  the  other. 

THE    NATIONAL  DEBT  OF  GREAT  BRITAIN. 

The  national  irredeemable  debt  of  England,  as  I  have 
before  observed,  contains  the  strength  of  the  nation,  by 
uniting  the  private  interest  of  the  fund-holders  to  the  gener^ 
al  public  ir)Ltei;es,t  of  the  kingdom. 


buncombe's  free  banking.  257 

Every  fund-holder  has  a  direct  interest  in  the  support  of 
the  government  of  Great  Britain,  equal  to  the  amount  of 
funds  he  holds ;  and  hence  the  easy  solution  of  what  ap- 
pears problematical  to  Americans,  and  the  clear  illustration 
of  the  fact,  that  the  English  irredeemable  national  debt  of 
«56800,000,000  sterling,  is  become  the  capital  of  the  king- 
dom. Private  interest,  being  the  governing  passion  of 
him  who  has  but  c£100,  as  of  him  who  holds  .£100,000, 
from  the  highest  in  office  to  the  lowest  in  servitude,  "  self- 
love,  the  spring  of  action,  rules  the  soul.'* 

FUND-HOLDERS    EXERCISE    NO  INFLUENCE  OVER  THE   MAN- 
AGEMENT OF  THE  FUNDS. 

Another  important  fact  connected  with  this  fund  is,  that 
the  fund-holders  exercise  no  influence  over  these  funds, 
either  with  regard  to  the  management  of  the  fund  or  the 
rate  of  interest  to  be  allowed. 

The  government  have  issued  bonds  at  various  times,  at 
such  a  rate  of  interest  as  they  would  be  likely  to  sell  at,  at 
the  time ;  they  specify  the  rate  of  interest,  and  the  time  of 
payment  of  that  interest,  but  establish  no  time  for  the  pay- 
ment of  the  principal.  These  bonds  are  sold  in  the  market 
for  what  they  will  bring.  If  the  rate  of  interest  is  placed 
above  the  smallest  rate  at  which  these  bonds  would  have 
sold,  they  sell  at  a  premium ;  if  the  rate  of  interest  is  fixed 
too  low,  they  remain  unsold,  unless  tliat  contingency  bo 
provided  for,  when  they  sell  for  less  than  the  face  of  tho 
bond,  when  they  are  said  to  be  below  par. 

The  only  claim  the  government  has  allowed  the  fund' 
holder,  is  that  of  demanding  the  interest  when  it  becomes 
due,  on  the  amount  of  any  given  fund  that  he  holds. 
Whether  it  be  what  is  called  three  per  cent,  stocks,  or  Hve 
per   cent,  stocks,  the  holder  of  the  stock  has  the  right  to 


^58  DUNCOMBE*S  FREE  BANKING. 

demand  the  full  amount  due  to  liim ;  but  not  to  enquire  any 
further  respecting  its  management  on  account  of  his  being 
a  fund-holder,  or  exercise  any  influence  over  the  fund  on 
that  account. 

How  to  give  American  citizens  a  similar  interest  in  the 
support  of  the  American  government,  without  the  evils  of 
a  national  debt,  to  that  which  the  English  have  in  support  of 
the  mixed  monarchy  of  Great  Britain,  is  a  leading  object  of 
the  present  work. 

The  wealth  of  every  country,  being  the  most  powerful 
engine  that  the  country  possesses,  either  in  support  of  peace 
or  war — the  promotion  of  religion,  moral  education,  or  civ- 
il harmony  or  discord — I  am  desirous  of  enlisting  and  se- 
curing the  wealth  of  the  United  States,  that  is,  the  wealth 
of  the  American  capitalists,  in  favor  of  the  republican  gov- 
ernment of  the  Union,  to  the  same  extent  that  capitalists  in 
England  are  directly  interested  in  the  support  of  the  gov- 
ernment of  Great  Britain.  Not  in  the  same  way — not  by 
involving  the  government  of  the  United  States  in  an  irre- 
deemable debt,  either  to  themselves,  that  is,  to  their  own 
citizens,  or  to  a  foreign  people,  which  is  immeasurably 
worse  ;  but  offering  capitalists  stock,  always  convertible  in 
the  stock  market,  precisely  as  the  funded  debt  of  Great  Brit- 
ain now  is,  or  as  the  bank  stock  of  our  incorporated  banks  al- 
ways are,  at  a  shade  higher  or  lower  price,  as  the  stock  pays 
a  higher  or  lower  rate  of  interest,  as  compared  with  other 
investments,  or  as  any  other  contingency  may  influence  the 
price  of  funds  generally  in  the  market,  but  always  com- 
manding its  highest  value. 

Capitalists  would  have  the  same  confidence  in  the  stock 
of  a  people's  republican  bank,  established  by  a  general  free 
banking  law,  that  English  capitalists  have  in  the  funds  of 
the  governnaent  of  Great  Britain, 


duncombe's  free  banking.  259 

In  this  stock,  investments  would  be  permanent,  safe, 
convenient  and  profitable ;  yielding  the  largest  dividends 
of  any  funds,  perhaps,  in  the  world — possessing  equal  se- 
curity, and  punctuality  of  payment  of  dividends  and  of 
convertibility. 

The  wealth  of  the  people  of  these  United  States  would 
be  added  to  the  democracy  of  numbers — giving  strength, 
stability,  consistency,  and  permanency  to  republican  institu- 
tions, and  rendering  the  currency  of  the  country  equally 
republican  with  the  other  elementary  principles  of  the  gov- 
ernment. It  would  thus  become  the  key-stone  of  the  arch 
of  the  republican  edifice. 


CHAPTER  XXXIX. 

FREE  REPUBLICAN  UNITED  STATES  BANK. 

Some  of  the  benefits  of  an  United  States  liank  stock,  derived  from  the  transferable 
character  of  the  stock  in  the  fund  market. 

The  addition  of  such  an  immense  capital,  as  the  bank 
stock  of  all  the  paper  currency  would  constitute,  to  be  ad- 
ded to  the  credit  and  commodity-currency  of  the  country, 
would  immensely  improve  the  capital  of  the  country,  it  be- 
ing marketable  at  a  given  nearly  uniform  price. 

The  specie  thus  invested  in  bank  stock,  would  continue  to 
be  available  funds  in  the  hands  of  the  stockholders,  while  it 
would  be  productive  wealth  to  them,  to  the  amount  of  the 
dividends,  which  being  regularly  paid  quarterly  or  semi-an- 
nually, would  confirm  public  confidence  in  the  institution, 
while  it  furnished  the  bank  fund-holder  with  money  in  his 
pocket  and  cash  at  interest. 

While  individuals  were  thus  immensely  benefitted  by  the 
establishment  of  such  a  fund,  the  public  would  gain  an  ac- 


S60  duncombe's  free  banking. 

quisition  of  credit,  or  commodity-capital  and  currency^  to 
the  whole  amount  of  specie  thus  invested  in  bank  stock, 
the  value  of  which  would  be  enhanced  by  the  separation  of 
currency  from  credit,  and  thus  rendering  the  currency  uni- 
formly convertible  at  sight. 

THE  ARISTOCRACY  OF  INCORPORATED  COMPANIES. 

All  incorporated  companies  are  aristocratic  bodies,  be- 
cause they  have  peculiar  rights,  powers  and  privileges, 
which  are  not  enjoyed  by  the  public,  and  which  tlie  public 
are  not  unfrequently  expressly  forbidden  practicing  or  en- 
;oying.  But  among  chartered  companies  none  of  them  pos- 
sess such  anti-republican  principles  as  monied  corporations. 

Bank  incorporations,  by  their  controlling  the  currency  of 
the  country,  not  only  exercise  an  immense  monetary  and 
political  influence  at  home,  but  they  give  the  financial  char- 
acter to  the  country  in  foreign  lands. 

Whatever  defects  are  found  In  the  monetary  affairs  of 
this  country,  are  charged  upon  its  ^^olitical  institutions  by 
those  who  are  unable  to  understand  our  form  of  government; 
and  the  secret  workings  of  anti-republican  incorporations 
upon  it,  with  all  their  baneful  effects,  by  foreigners  are 
charged  upon  our  republican  principles  and  institutions. 

Nations  of  the  earth  bowed  down  by  arbitrary  laws,  op- 
pressed and  impoverished  by  taxes,  tythes  and  poor  rates, 
who  are  zealously,  quietly  struggling,  peaceably  to  renovate 
their  own  governments,  and  to  infuse  into  them  the  pure 
principles  of  democracy,  of  equal  justice,  and  equal,  civil 
and  religious  liberty  to  all,  are  met  upon  the  threshold  with 
the  charge  of  American  suspensions  of  specie  payments 
by  their  banks,  and  the  extravagance  and  idebtedness  of 
our  states  to  foreign  countries  ;  thus  stopping  their  mouths 
with  arguments,  drawn  from  republican  America.     While 


iduncombe's  ^kee  banking.  261 

all  Europe  is  tending  toward  democracy,  we  are  becoming 
daily  more  and  more  aristocratic. 

I'his  should  enlist  the  energies  of  the  philanthropist  and 
the  patriot,  to  come  to  the  investigation  of  the  cause  of  our 
retrogradation,  and  the  defence  and  support  of  truth  and 
justice,  and  of  equal  rights  to  all  mankind,  with  the  ulti- 
mate universal  peaceful  extension  of  equal,  civil  and  reli- 
gions liberty  throughout  the  world. 

Incorporated  banking  companies,  by  giving  the  country 
a  credit  paper  currencs%  in  lieu  of  a  sound  melalic  curren- 
cy, are  forever  tending  to  sever  the  bonds  of  republican 
union,  founded  upon  liberty  and  equality.  They  are  for- 
ever opposed  to  the  universal  extension  of  equality  and  hu- 
man happiness  to  all  mankind. 

The  learned  professions  are  naturally  aristocratic  and  ex- 
clusive in  their  religious,  political  or  financial  views  ;  part- 
ly from  the  laws  of  their  situations,  and  perhaps  from  their 
exclusive  possession  of  certain  sciences  and  branches  of 
useful  and  profitable  knowledge,  and  from  their  mixing  al- 
most exclusively  with  men  of  letters,  and  men  of  their 
own  or  other  learned  professions. 

The  least  defensible  of  all  aristocracies  are  legalized 
credit  aristocracies ;  they,to  obtain  their  exclusive  privileges, 
argue,  reason,  and  administer  to  x\\e  gullihility  o^  mankind, 
until  their  earnest  and  apparently  sincere  protestations  in 
favor  of  bank  paper,  its  convenience,  its  excellence,  and  its 
value  to  the  community,  captivates  thousands  of  honest 
men,  who  are  charmed  into  a  belief  that  bank  paper  is  mon- 
ey, and  that  such  money  is  real  capital.  Hence  the  im- 
mense number  of  flatterers  and  courtiers  that  continually 
follow  in  the  train  of  this  credit  aristocracy.  They  seldom, 
however,  leave  this  flickering  credit  light,  imtil  like  the 
miller  fly  that  turns  his  giddy  whirl  around  the  lighted  ta- 
w 


262  buncombe's  free  bankii^g, 

per,  their  wings  are  touched  with  the  flame,  and  they  are 
unwittingly  drawn  into  its  vortex  and  lost  in  the  bla:ie  of 
their  blind  adoration. 

MANKIND  LEARN  SLOWLY  EVEN  BY  EXPERIENCE  J    THEREFOREi 

THE  NECESSITY  OF  "  LINE  UPON  LINE  AND  PRECEPT  UPON 

PRECEPT." 

There  is  no  instruction  in  the  past.  The  explosion  of 
one  incorporated  bank  only  gives  place  to  another.  That, 
too,  in  its  turn,  follows  rapidly  "  in  the  footsteps  of  its  pred- 
ecessor ;"  and  thus  the  circle  of  promises  and  belief,  decep- 
tion and  disappointment,  distress  and  ruin  is  complete,  and 
continued  on  "  from  generation  to  generation." 

The  public  stock  of  gullibility  is  unexhausted,  and  oth- 
er artful  intriguers  practice  the  trade  of  deception  upon  the 
public  again  with  like  success. 

Hence  the  importance  of  the  Congress  of  the  United 
States  seriously  taking  up  the  subject  of  the  currency,  and 
providing  some  salutary  remedy  of  guarding  the  public 
against  these  repeated  impositions. 

Extracts  from  Governor  CarlirCs  Message  to  both  Houses 
of  the  Legislature  of  Illinois,  on  the  2Qth  Nov.  1840. 

The  Governor  says  : 

"  The  pernicious  consequences  inflicted  upon  the  country  by  the 
operations  of  banks  within  the  last  few  years,  is  too  indelibly  stamp- 
ed upon  every  department  of  business  to  be  misapprehended  by  the 
most  sceptical. 

"  The  fluctuatious  in  the  prices  of  labor,  property,  and  trade  of 
every  description,  have  kept  pace  with  the  alternate  expansions  and 
contractions  of  their  issues,  and  whether  the  injuries  thus  sustained 
are  attributable  to  their  guilt  or  innocence,  the  effect  upon  the  pros- 
perity of  the  people  is  the  same. 

"  So  interwoven  have  the  affairs  of  our  citizens  become  with  these 
institutions,  that  it  cannot  be  denied  that  they  control  and  direct  the 


buncombe's  free  banking.  263 

circulating  medium,  commerce  and  wealth  of  the  country ;  and  not 
only  so,  they  frequently  wring  from  legislative  bodies  an  acknowl- 
edgment of  their  utility,  and  exercise  an  influence  over  the  public 
mind  which  it  is  difficult  to  overcome. 

"  Thus  hare  they  fortified  themselves  behind  an  almost  invul- 
nerable rampart,  erected  by  encroachment,  and  justified  by  the  ty- 
rant's plea,  *  necessity.' 

"  Usurpations  of  whatever  character,  are  usually  preceded  with 
the  persuasion,  that  they  are  essential  to  the  advancement  of  the 
people  in  the  scale  of  prosperity  and  happiness  ;  and  in  this  way 
they  are  stripped  of  their  rights,  and  bound  in  chains  of  political 
slavery,  before  they  are  aware  of  their  danger. 

"  To  guard  ;  gainst  such  startling  power  concentrated  in  banks, 
all  the  virtue  and  energy  of  the  patriot  must  be  called  into  action 
and  constant  requisition." 

This  warning  voice  should  be  re-echoed  from  Maine  to 
Georgia.  An  insidious  foe  is  lurking  in  the  bosom  of  this 
republic.  It  is  the  offspring  of  private  interest  and  credu- 
lity, nursed  in  the  lap  of  luxurious  idleness,  and  matured  in 
the  school  of  treachery  and  deceit. 

Will  not  the  people  rise  in  their  might  1 — they  are  the 
sovereign  power.  Their  representatives  cannot,  or  will  not 
act,  until  they  hear  the  public  voice  bidding  them  do  their 
duties  or  retire.  They  are  the  creatures  of  party  ;  and  a 
few  designing,  artful  leaders  give  them  the  cue,  which  they 
as  cunningly  execute.  And,  unfortunately,  these  leaders  are 
too  often  aristocrats  themselves  at  heart,  however  loudly 
they  may  proclaim  the  excellence  of  democracy,  and  the 
beauties  of  republicanism ;  or  they  are  indebted  to  some 
monetary  power,  or  are  feed  and  employed  by  some  bank 
as  agent,  attorney  or  counsel,  or  they  have  some  powerful 
friend  whose  interest  favors  credit  power,  and  the  party  are 
carried  against  the  people.  Thus  the  whole  weight  and 
influence  of  one  party  is  brought  to  silence  just  alarm,  and, 
siren-like,  to  charm  the  watchful  republican  to  repose, 


264  DtTNCOMBE's  FREE  BANKING. 

CrON€FRESS    SI«)inLD  INTERPOSE  THE  AUTHORITY   OF  THE  NA- 
TION, TO  PRESER\^E  THE  PEOPLE  FROM  IMMINENT  DANGER 
AND  IMPENDING  RUIN. 

Tke  congress  of  tlie  United  States  should  take  up  the 
sutject  of  the  monetary  affairs  of  the  country,  and  lend  its 
powerful  aid  to  guard  the  public  again&t  the  portentious 
dangers  that  threaten  every  part  of  the  Union,  and  protect 
them  against  the  repeated  i"mpositions  of  incorporated  com- 
panies ;  hy  organizing  the  people  to  control  and  regulate 
the  currency  according  as  their  own  interests  shall  require, 
to  promote  the  greatest  good  of  the  great-est  number,  in  the 
best  possible  manner,  at  the  least  expense  and  labor. 

The  people  are  the  best  judges  of  their  own  wants,  and 
know  best  how  to  promote  their  own  interests.  All  they 
require  is  organization  for  the  purpose. 

The  people  are  always  right  when  they  are  not  misled 
by  artful  demagogues  ;  and  they  will  always  be  found  quite 
competent  to  govern  themselves,  as  well  in  matters  of  cur- 
rency as  in  matters  of  politics,  provided  the  question,  to  be 
decided  by  them  be  fairly  and  honestly  stated  when,  submit- 
ted  to  their  consideration.  A  moral  education  and  particular 
instruction  of  the  people  upon  matters  to  be  referred  to  them 
for  their  special  consideration,  is.  all  that  is  necessary  to  se- 
cure their  correct  judgment  and  right  decision,  upon  what- 
ever questions  may  be  necessarily  submitted  to  their  partic- 
ular attention. 

Much  danger  to  the  republic  is  to  be  apprehended  from 
the  establishment  of  a  national  debt ;  but  that  evil  is  great- 
ly increased  v/hen  that  debt  is  to  be  due  to  foreigners. 

Notwithstanding  the  wide  difference  between,  the  public 
debt  of  the  United  States  and  the  irredeemable  public  debt 
of  England,  still  the  dangers  of  a  national  debt  are  im- 
mense.    The  value  of  the  funded  debt  of  England  consists 


buncombe's  free  banking.  265 

in  lis  being  irredeemable,  and  being  held  and  owned  by  the 
wealthy  portion  of  the  people,  whose  interests  are  therefore 
identified  with  the  funds,  and  through  them,  with  the  gov- 
ernment of  the  kingdom.  The  continuance  of  the  punctu- 
al payment  of  that  interest,  and  tlie  convertibility  of  the 
funds,  through  the  instrumentality  of  the  Bank  of  England, 
aided  by  the  government  and  aristocracy,  with  the  assist- 
ance of  exchequer  bills  and  public  and  private  loans,  renders 
the  government  secure,  and  the  notes  of  the  Bank  of  Eng- 
land equally  safe. 

There  is  something  a  little  inconsistent  (in  this  country 
where  a  national  debt  is  looked  upon  with  so  much  abhor- 
rence,) in  making  this  debt  the  basis  for  the  issue  of  paper 
to  circulate  as  money  ;  yet  such  is  the  case  according  to  the 
provisions  of  the  New  York  General  Banking  law. 

There  is  far  less  objection  to  passing  public  debts  as  part 
of  the  credit-currency,  than  there  is  in  making  them  the  ba- 
sis upon  which  to  issue  paper  to  circulate  as  money. 

The  national  debt  of  Great  Britain  can  in  no  way  com- 
pare with  the  national  debts  of  the  individual  states  or  of 
the  United  States.  The  former,  although  irredeemable,  is 
and  must  be  perfectly  convertible  at  the  will  of  the  holder 
in  the  fund  market ;  that  is,  the  government  must  always 
support  the  credit  of  the  funds  to  such  an  extent  as  to  ren- 
der them  desirable  investments  for  capitalists,  by  the  prompt 
punctual  payment  of  the  interest  at  stated  periods,  or  the 
government  itself  must  cease. 

But  in  the  United  States,  party  influence  usurps  the 
power  of  right,  and  improvident  loans  and  unwise  and  ex- 
travagant expenditures  by  one  party,  lessens  the  fancied  re- 
sponsibility of  the  other  party,  when  they  come  into  power, 
to  fulfil  faithfully  to  the  letter,  the  improvident,  unpopular 
expenditures  of  tlieir  political  opponents;    and  casualties 


266  duncombe's  free  banking. 

may  prevent  the  punctual  payment  of  interest  or  principal 
due  in  a  foreign  country,  by  which  the  public  faith  may  be 
materially  impaired  ;  while  in  England  no  such  an  event 
can  occur,  and  the  government  of  the  kingdom  continue. 
A  change  of  ministers  is  tlie  natural  consequence  of  the 
government  being  unable  to  carry  any  measure  of  the  ad- 
minis-tration, 

A  large  proportion  of  the  productive  wealth  of  the  na- 
tion consists  in  this  fund,  if  that  can  be  called  productive 
which  only  transfers  the  earnings  of  one  man  who  has  no 
funds,  to  him  who  holds  the  government  debts. 

Yet,  such  is  the  fact,  that  the  interest  of  the  national 
debt  of  England,  collected  upon  imposts  and  taxes  from 
the  industrious  laboring  and  consuming  classes,  is  equal  to 
half  the  produce  of  England.  And  this  constitutes 
the  productive  wealth  of  a  large  proportion  of  the  influen- 
tial men  of  the  nation. 

"While  the  government  continues  to  preserve  the  credit  of 
the  funded  debt,  the  credit  of  the  bank  of  England  must 
continue.  For,  with  a  loss  of  credit,  there  must  be  a  loss 
of  confidence,  and  a  loss  of  support  by  the  wealthy,  and 
wath  the  withdrawal  of  their  support  must  terminate  the 
government. 

Money  possesses  a  powerful  influence  in  governments,  a 
potency  and  undeniable  charm  in  making  things  agreeable, 
that  would  not  be  pleasing  without  it,  and  in  making  a  gov- 
ernment popular  that  would  have  otherwise  been  obnoxious 
to  the  people. 

Hence  the  importance  of  interesting  the  private  feelings 
and  pecuniary  situation  of  every  American  in  support  of 
the  institutions  of  thi^  country,  to  the  same  extent  that  the 
English  are  personally  individually  interested  in  the  sup- 
port of  the  government  of  England;  otherwise  the  greg,ter 


duncombe's  free  banking.  267 

zeal  occasioned  by  the  greater  interest  of  the  English, 
must,  since  the  almost  daily  intercourse  between  the  two 
nations  is  established,  by  degrees,  imbue  the  American  peo- 
ple with  a  love  of  foreign  institutions,  and  a  distaste  for  their 
own  plain,  simple,  republican  government  of  equality, 
which  has  so  far  less  power  to  dazzle  and  blind  the  peo- 
ple, than  the  splendid  brilliancy  of  show  and  parade  that 
attends  "  the  churchman's  pomp  and  statesman's  pride." 


CHAPTER  XL. 

INDIRECT  TAXATION  BY  COLLECTIONS  OF  CUSTOMS,  DUTIES, 
AND  IMPOSTS,  ARE  MORE  OPPRESSIVE,  BUT  GENERALLY 
LESS  OFFENSIVE  TO  THE  PEOPLE  THAN  DIRECT  TAXATION. 

In  England  a  large  proportion  of  the  revenues  of  the 
Crown  are  derived  from  duties,  imposts,  excises,  various 
licenses,  and  other  indirect  taxes,  which  are  paid  by  im- 
porters, manufacturers,  wholesale  dealers,  and  merchants 
from  foreign  countries,  and  in  such  a  variety  of  ways,  that 
few  individuals  in  the  nation  know  the  extent  to  which  they 
are  taxed. 

Indirect  taxes,  as  they  are  paid  by  the  consumer,  fall 
more  heavily  upon  the  labor  of  the  producing  classes  than 
upon  the  legitimate  objects  of  taxation,  (wealth  and  luxu- 
ries.) 

The  retailing  merchant  pays  the  wholesale  dealer  the 
price  of  his  commodities,  with  the  duties,  to  which  is  added 
his  profit  upon  the  whole.  The  retailer,  too,  must  have 
the  same  per  centage  of  profit  upon  the  outlay,  as  well  upon 
that  part  of  the  amount  paid  for  duties,  as  upon  the  charge 
■for  the  articles ;  hence  the  consumer  not  only  pays  the 
duty  chargeable  upon  the  articles,  but  he  also  pays  profits 


268  buncombe's  free  banking. 

to  some  two  or  three,  and  often  perhaps,  to  twice  as  many 
dealers  in  the  article,  in  addition  to  the  cost  of  the  article 
and  duty. 

AN    ILLUSTRATION  OF  THE    DIFFERENCE  BETWEEN    INDIRECT 
AND  DIRECT   TAXATION. 

Suppose  a  yard  of  cloth  costs,  or  is  entered  at  the  cus- 
tom house  at  $4  a  yard,  and  that  twenty  five  per  cent,  ad- 
valorein  duties  are  charged  upon  the  article,  the  wholesale 
dealer  has  the  cloth  at  $5  a  yard.  Suppose  he  charges 
twenty  five  per  cent,  profit,  this  brings  the  cloth  to  cost  the 
retailer  $6,25  a  yard.  He  charges  a  retail  profit  of  33J 
per  cent,  on  his  outlay  ;  enhancing  the  price  of  the  yard  of 
cloth  to  $8,33  to  the  consumer — provided  it  be  not  sold 
more  than  twice  after  the  duties  are  paid  ;  but  should  the 
profits  have  exceeded  the  above  statement,  the  advance 
upon  the  amount  paid  for  duties  would  keep  pace  with 
the  profit  charged  upon  the  amount  paid  for  the  cloth,  so 
that  the  consumer  pays  $1,66  for  duty  and  profit  on  duty, 
instead  of  one  dollar  duty,  being  all  that  was  charged  at  the 
customs,  and  in  fact  more  than  was  actually  paid  into  the 
treasury,  since  the  per  centage,  or  portion  of  the  collector's 
salary  must  be  deducted.  Hence  it  is  easy  to  see,  that  $100 
raised  for  public  purposes  by  impost  duties,  costs  the  con- 
sumers some  $200. 

This  would  certainly  appear  excessively,  and  uselessly 
oppressive,  were  it  not  that  when  this  duty  is  levied  only 
on  such  articles  as  can  be  grown,  manufactured  or  produ" 
ced  in  the  United  States  in  sufficient  quantities  for  domestic 
consumption,  it  may  and  does  encourage  Americans  to  com- 
pete with  foreigners  in  the  produce  of  these  articles — there- 
by rendering  the  United  States  independent  of  foreign 
njanufactories,  as  well  as  lessening  their   imports,  and  pre* 


duncombe's  free  bank1n(3.  ^69 

venting  (as  is  the  natural  consequence,)  the  exportation  of 
specie. 

The  people  are  least  oppressed  by  a  high  tariff,  when 
the  duties  are  levied  upon  articles  that  may  be  grown, 
manufactured  or  produced  insufficient  quantities  in  the 
United  States  for  domestic  consumption ;  while  such  ne- 
cessaries of  life  as  cannot  be  produced  in  America  ought 
not  to  be  heavily  taxed,  except  it  be  for  the  special  purpose 
of  raising  a  revenue. 

The  tariff  would  not  require  raising  so  high  to  prevent 
foreign  importations,  if  the  people  were  allowed  to  regu- 
late the  paper  portion  of  their  currency  as  congress  does 
the  coining  and  value  of  the  precious  metals. 

From  these  remarks,  we  can  collect  some  idea  of  the 
difference  between  credit  bank  paper  in  England  and  in 
America. 

In  England,  the  whole  united  strength  of  Crown,  Lords 
and  Commons,  army  and  navy,  agriculture  and  commerce, 
manufactories,  internal  improvements,  and  public  and  pri- 
vate prosperity  of  the  nation,  with  the  very  existence  of  the 
government,  all  depend  upon  one  word,  credit  :  let  that 
fail — let  the  interest  cease  to  be  paid — let  the  funds  cease 
to  be  saleable — and  let  the  wealthy  of  the  native  become 
dissatisfied — and  revolution  must  instantly  follow.  Con- 
sequently the  credit  of  England  has  the  positive  absolute 
necessity,  and  actual  subsistence  of  the  individuals  owning 
the  money  of  the  nation,  uniced  to  the  government  in  the 
strongest  possible  manner. 

Credit  cannot  fail,  and  the  government  continue.  Hap- 
pily for  America,  no  such  bond  of  desperate  and  dangerous 
necessity  exists  here.  But  it  would  be  wise  to  secure 
the  pleasing,  profitable,  private  interest  that  the  English  have 
in  support  of  their  government,  in  support  of  that  of  the 


270  i>tJNCOMBE*S  FREE  BANKING. 

American.  This  may  be  successfully  and  profitably  done 
by  the  plan  proposed  of  a  people*s  currency — a  United 
States  Republican  Free  Bank  of  Issue,  with  a  divided  ad- 
ministration of  the  Banks  of  Discount. 

A  marketable  national  debt  due  to  the  citizens  of  a 
country,  though  the  taxes  necessary  to  pay  the  interest 
would  be  a  galling  chain,  is  nevertheless  an  indissoluble 
bond  of  union  between  the  people  and  the  government,  es- 
pecially in  a  sub-military  government. 

In  England,  a  large  proportion  of  the  revenues  of  the 
government  is  derived  from  duties,  imposts,  and  indirect 
taxes,  that  are  paid  by  the  merchants,  importers  and  manu- 
facturers :  the  existence  of  which  is  hardly  known  to  the 
consumer,  who  pays  them  all  ultimately,  with  a  large  per 
centage  of  profit  on  the  duty,  as  we  trust  we  have  satisfac- 
torily explained. 

But  from  this  we  can  easily  understand,  that  in  England 
the  non-payment  of  the  interest  of  the  national  debt,  would 
destroy  the  interest  of  the  wealthy,  and  turn  them  against 
the  administration.  The  non-payment  of  the  sailors  and 
soldier,  would  arouse  the  Lion  of  old  England  in  its  full 
strength,  and  teach  Kings  and  nobles,  churchmen  and  states- 
men, that  "  the  voice  of  the  people  is  the  voice  of  God.** 
With  England,  credit  is  every  thing. 

The  national  debt  of  Great  Britain  is,  therefore,  a  per-- 
manent  fund,  that  must  continue  and  remain  coeval  with 
the  government ;  always  marketable,  and  therefore  conver- 
tible at  the  will  of  the  holder  into  bank  of  England  paper 
and  exchangeable  for  other  commodities.  But  should  the 
bank  again  suspend  specie  payment,  and  the  assistance  of 
the  Chancellor  of  the  Exchequer  and  the  ministry,  by 
loans,  or  otherwise,  be  unable  to  prevent  the  notes  of  the 
bank  from  becoming  materially  depreciated,  while  the  gov- 


duncombe's  free  banking.  271 

ei*nment  remained  popular  their  bills  would  be  far  prefer- 
able to  the  notes  of  suspended  American  banks,  even  al- 
though exchequer  bills  which  are  receivable  in  all  dues  to 
the  government,  would  no  longer  circulate  freely,  and  al- 
though the  rate  of  interest  per  day  be  greatly  increased, 
they  must  pay  debts  while  the  government  continues  more 
desirable  for  capitalists  to  the  extent  of  the  duties  they  had 
to  pay  than  other  funds,  or  than  hoarding  up  of  their  specie. 
This  must,  however,  soon  overturn  the  government,  as 
they  will  be  returned  upon  it  in  payment  of  taxes,  and 
leave  them  without  the  means  of  supporting  themselves  or 
paying  the  army  or  navy,  or  the  civil  list. 

Still,  however,  the  suspension  of  specie  payments  by  the 
bank  of  England,  differs  widely  in  its  effects  upon  com- 
merce and  business,  from  that  of  suspension  by  American 
banks  in  the  United  States.  The  bank  of  England  has  the 
credit  of  the  British  government  for  its  support,  while 
American  banks  have  not  even  the  stockholders  liable. 

REMARKS  UPON  THE  SUSPENSION  OF  THE  BANK  OF  ENGLAND. 

When  the  bank  of  England  suspends  specie  pa^'ment, 
she  does  not  do  so  because  she  has  paid  out  her  capital,  for 
that  remains  the  same  and  as  sec  are  as  the  government  it- 
self, with  which  its  credit  is  so  intimately  blended. 

Suspensions  of  the  bank  of  England  can  only  occur 
when  the  receipts  of  the  government  have  not  been 
paid  in  specie  ;  or  when  the  amount  received  from  the  Ex- 
chequer, and  the  amount  of  specie  received  from  the  ordi- 
nary commercial  transactions  of  its  own  busiiiess,  have  been 
less  than  the  demand  for  specie  upon  the  bank,  for  the  re- 
demption of  their  own  notes  in  the  ordinary  business  of  the 
bank  ;  while  the  suspension  of  specie  payment  by  American 
banks,  is  not  rendered  quite  unavoidable  until  the  whole  of 


272  DUNCOMBE*S  FREE  BANKING. 

* 

the  paid  up  capital  of  the  hank  and  its  specie  deposltes  have 
been  drawn  from  its  vaults,  and  its  available  funds  have  all 
been  disposed  of  The  prospect  of  the  ultimate  redemp- 
tion of  the  notes  of  an  United  States  bank  having  suspend- 
ed specie  payment,  depends  wholly  upon  the  solvency  of 
its  debtors,  and  the  prudence  and  economy  of  its  directors. 
The  government  of  the  United  States  has  nothing  invol- 
ved— and  ought  never  to  have,  in  the  solvency  of  an  in- 
corporated banking  company,  any  more  than  it  has  in  the 
solvency  of  any  canal  or  rail  road  company,  or  in  the  liabili- 
ties of  any  private  individual. 

Banks  claim  precedence  in  their  claims  upon  the  estates 
of  insolvent  debtors — with  how  much  justice  let  other 
creditors  enquire. 

Although   the    English   nation  have   the  most  unlimited 

confidence,  both  in  the  strength  of  the  government  and  the 
credit  of  the  bank  of  England  ;  yet  even  with  this  pow- 
erful and  decided  advantage  in  point  of  credit  enjoyed  by 
the  bank  of  England  over  the  credit  of  chartered  banks  in 
America,  after  both  of  them  have  suspended  specie  pay- 
ment, I  am  not  prepared  to  say  that  the  Queen,  Lords 
and  Commons,  Church  and  State  union,  with  the  army  and 
navy,  would  be  able  to  keep  the  peoj^le  silent,  should  the 
funds  of  the  nation  become  unsaleable,  and  the  notes  of  the 
bank  of  England  inconvertible,  or  even  greatly  below  par. 
But  should  the  market  price  of  specie  remain  but  a  shade 
higher  than  at  present,  and  the  capital  of  the  nation,  that  is, 
the  funded  debt,  remain  marketable,  with  but  a  slight  de- 
preciation, the  suspension  of  specie  payment  by  the  bank 
of  England  would  have  far  less  influence  on  the  commer- 
cial prosperity  of  England,  than  a  general  suspension  by 
American  banks  has  upon  the  American  money  market  ; 
since  the  notes  of  the  bank  of  England  are  a  lawful  tender 
in  the  payment  of  all  debts  except  its  own. 


BUNCOMBE'S  FREE  BANKING.  273 

But  if  the  value  of  specie  should  not  materially  vary 
from  its  present  value,  or  former  rate,  and  the  balance  of 
trade  should  not  be  substantially  against  the  kingdom,  and 
the  crops  should  be  plentiful,  and  the  foreign  demand  for 
manufactures  should  increase,  the  business  of  the  large 
manufacturing  districts  v^'ould  continue;  or  should  some  for- 
eign expedition  furnish  employment  and  pay  for  the  surplus 
population  of  the  kingdom,  tho  bank  of  England  might 
suspend  without  material  injury  to  trade  or  manufacturers  : 
the  administration  might  not  be  even  changed  by  the  sus- 
pension, the  government  might  continue  firm,  and  the  busi- 
ness of  the  country  continue  as  though  nothing  had  happen- 
ed, and  the  bank  might  ultimately  resume  specie  pay- 
ment. 

The  notes  of  the  bank  of  England  are  money,  receiv- 
able by  the  goverment  in  the  payment  of  all  rates,  ta^es 
and  dues  accruing  to  the  government;  and  in  the  payment 
of  all  private  debts,  and  commercial  transactions  Mathin  the 
kingdom.  And  while  the  balance  of  trade  was  not  against 
England,  her  bills  on  America  and  other  countries  where 
she  had  funds,  stocks  or  moneys  lent  upon  interest,  would 
enable  her  to  continue  her  foreign  commerce,  (as  her  bank 
paper  would  support  her  domestic  business,)  as  perfectly  as 
she  could  do  with  the  precious  metals  in  abundance. 

But  reverse  the  wheel  of  fortune.  Let  the  crops  be 
light  and  insufficient  for  domestic  consumption,  the  demand 
for  manufactures  for  exportation  be  checked  or  removed 
altogether,  and  discontent  accompany  distress  and  hunger 
at  home,  in  the  agricultural  districts,  as  well  as  in  the  manu- 
facturing towns  ;  and  for  the  want  of  capital,  labor  should 
cease,  an  advance  in  the  price  of  bread-stuffs  must  Imme- 
diately follow,  without  an  increase  of  the  means  of  pay- 
ment, if  they  must  be  imported  ;  the  corn  laws  must  be  re- 


274  DITNCOMBE  S  FREE  BANiilNG. 

pealed,  or  the  people  must  starve,  and  with  their  repeal  un- 
der such  circumstances,  the  landed  interest  must  suffer. 

England  might  then  rejoice  in  her  American  investments. 
It  may  be  safer  and  better  for  the  government,  as  well  as 
for  individuals,  to  have  more  resources  than  one  ;  for,  in 
times  of  difficulty  and  danger,  it  may  not  be  the  safest  way 
to  have  all  one's  effects  in  one  boat :  and  American  funds 
are  valuable  commodities  to  exchange  for  English  stocks 
with  those  who  are  desirous  of  removing  to  America.  If 
times  should  become  harder  and  more  intolerable,  and  prop- 
erty inconvertible,  a  small  investment  in  American  stocks 
will  be  comfortable,  besides  American  stocks,  to  persons 
living  in  America,  pay  a  higher  interest  than  English  stocks. 

But  from  all  this  we  see,  that  in  England  the  notes  of  the 
bank  of  England  must  remain  nearly  convertible  as  long 
as  the  government  preserves  its  present  form.  The  notes 
of  the  bank  of  England  would  be  as  convertible  into  most 
kinds  of  property,  and  be  nearly  as  current  under  a  sus- 
pension of  specie  payment  as  they  are  at  present.  The 
brokers  would  probably  advance  a  shade  on  the  price  of 
specie  upon  the  first  suspension  of  specie  payment;  but 
should  a  wide  difference  exist  between  bank  of  England 
notes  and  specie,  the  convertibility  of  the  funded  debt  would 
be  proportionably  diminished — the  bills  of  the  chancellor 
of  exchequer  would  be  returned  in  the  payment  of  taxes — 
the  monied  men  of  the  nation  would  waver  in  their  uni- 
form support  of  the  administration — business  men  would 
fear  to  extend  their  operations — the  laboring  classes  would 
findlessened  employment  and  lessened  wages,with  increased 
demands  for  prompt  payments,  which  accompany  diminish- 
ed credit.  The  government  would  be  driven  to  rely  upon 
physical  aid  for  support.  This  would  be  unpopular  among 
the  producers.     Combinations  would  be  formed  against  the 


buncombe's  free  banking.  275 

administration  :  minister  after  minister  would  be  defeated — 
parliament  must  be  dissolved.  Money  would  be  liberally 
advanced  to  secure  seats  in  parliament.  Candidates  would 
make  innumerable  promises  of  cheap  bread,  better  wages, 
and  more  employment,  which  each  in  turn  would  find  him- 
self unable  to  perform.  Discontent  would  increase ;  the 
poor  would  accumulate  ;  the  producers  would  diminish ; 
the  strength  of  the  tax-payers  would  become  increased, 
while  the  powers  of  the  collectors  would  be  diminished. 
The  demand  for  work,  for  wages,  and  for  bread,  would  in 
crease,  until  the  strong  arm  of  hunger  and  necessity  would 
seize  whatever  came  within  its  reach.  The  civil  authority 
would  be  disregarded  ;  **  might  not  right**  would  rule.  A 
military  despotism  or  anarchy  would  govern  the  country. 
An  equality  of  conditions  would  be  sought  by  many ; 
agrarian  principles  would  become  popular  among  the  peo- 
ple. The  army  and  navy  could  no  longer  be  paid  by  col- 
lections from  the  people ;  the  mutiny  act  could  no  long- 
er be  enforced;  and  an  equality  of  conditions  would  pro- 
duce an  equality  of  feelings,  and  a  concentration  of  designs 
and  uniformity  of  operations. 

The  great  secret  of  governing  a  nation,  through  fear, 
with  a  standing  army,  consists  in  keeping  the  people  'poor 
and  ignorant ;  in  this,  then,  consists  the  certain  safety  of 
the  government  of  Great  Britain.  When  the  landlords 
and  fund-holders  complain,  their  voices  are  heard.  They 
possess  the  sinews  of  war^ — the  strength  of  the  govern- 
ment— and  they  have  the  means  of  being  felt,  if  they  are 
not  heard,  when  they  complain.  In  England,  all  the  re- 
forms have  been  brought  about  by  the  Barons,  the  landed 
aristocracy,  or  the  fund-holders :  the  voice  of  the  democ- 
racy of  numbers  is  never  heard,  except  through  the  weal- 
thy of  the  nation. 


276  DL'NCOMBE^S  FREE  BANKING. 

The  common  laborers  may  not  offend  their  masters,  unless 
they  would  risk  perishing  in  the  streets.  Their  home,  the 
subsistence  of  their  families,  and  even  their  very  existence, 
depends  upon  the  will  of  their  landlords.  Therefore, 
while  the  landlord  is  contented  the  government  is  safe. 
When  the  wealthy  rise,  the  government  must  fall.  Hence 
a  gfovernment  debt  there,  is  the  bond  of  union  between  the 
people  and  government,  that  cannot  be  dissolved,  until  the 
government  are  unable  to  meet  the  payment  of  tlie  interest 
on  the  debt,  and  support  their  civil,  military  and  naval  ar- 
maments. 

But  a  government  debt  in  the  United  States  is  a  very- 
different  thing.  Its  credit  depends  upon  entirely  different 
principles.  The  people  are  the  sovereign  power.  They 
could  never  make  money  by  taking  out  of  one  hand  to  pay 
the  other,  while  liberty  and  equality  exists  among  them. 
Suppose  one  administration  to  involve  the  country  by  their 
extravagance,  improvidence  or  ambition,  they  would  assur- 
edly be  expelled  from  office  very  soon;  and  their  successors 
in  office  would  hardly  feel  themselves  bound  to  tax  them- 
selves and  friends  to  support  the  extravagance  of  their 
predecessors — their  political  opponents.  They  would 
hardly  incur  the  odium  attendant  upon  direct  taxation  to 
meet  promptly  demands  for  debts  contracted  against  their 
votes  and  in  opposition  to  their  opinions. 

Suppose,  under  such  circumstances,  the  balances  of  trade 
for  some  time  should  continue  against  the  United  States  ; 
and  tliat  remittances  could  only  be  made  in  specie.  The 
collection  of  taxes  in  specie  for  exportation,  u^der  a  heavy 
depression  of  trade,  could  not  long  continue  to  be  popular. 
Importing  merchants  would  find  much  inconvenience  in 
making  remittances  to  meet  their  importations,  and  would 
unwillingly  become  defaulters  in  a  foreign  country. 


D^NOOMBE  S  FREE  BANKING.  277 

There  is,  to  say  the  least  of  it,  some  uncertainty  in  the 
^convertibility  of  paper  to  circulate  as  money,  based  upon 
any  thing  but  the  precious  metals,  but  more  especially 
upon  government  debts,  where  the  payment  of  that  debt 
depends  upon  a  vote  of  a  popular  legislature.  Hepublics 
should  alv^ays  avoid  the  contraction  of  debts,  that  circum- 
stances may  render  extremely  difficult  for  them  to  pay. 
Direct  taxation  is  uniformly  obnoxious  to  the  people.  Im- 
posts and  duties  on  imported  articles  are  slowly  collected^ 
and  subject  to  many  contingencies  and  circumstances  liable 
to  its  defeat.  Direct  taxation,  although  generally  the  most 
obnoxious,  is  uniformly  the  most  certain  and  expeditious 
mode  of  raising  a  revenue.  When  the  trade  o^  a  country 
has  been  ^tqg  for  any  length  of  time,  the  imposition  of 
heavy  duties  checks  importations,  and  changes  the  invest^ 
ment  of  capital  from  mercantile  to  manufacturing  business. 

The  tariffought  not  to  be  lightly  changed,  unless  under 
circumstances  of  absolute  necessity,  except  upon  a  scale  for 
years,  that  capitalists  may  make  their  changes  of  capital 
with  safety  and  permanence. 

Hasty  and  ill-advised  changes  in  the  tariff,  unsettles  trade 
and  deranges  commerce.  When  the  balance  of  trade  is 
largely  against  a  country,  duties  may  lessen  importations ;  and 
unless  it  is  attended  with  a  corresponding  diminution  of 
exports,  it  may  aid  in  restoring  the  balance  of  trade. 

Until  I  can  believe  that  chartered  bank  credit  paper  is 
money,  and  that  such  money  may  continue  to  circulate  as 
specie  in  any  unlimited  quantity,  and  be  used  as  capital,  I 
shall  have  my  doubts  o^  the  wisdom  of  extending  credit 
by  heaping  credit  upon  credit,  beyond  the  actual  demand 
for  business  purposes,  and  the  limits  laid  down  permanent- 
ly for  the  issue  of  not  more  than  three  times  the  amount  of 
specie  actually  in  the  vaults  of  the  bank  at  the  time  of  thq 

X* 


278  buncombe's  free  banking. 

discount.  The  currency  should  be  permanently  uniform, 
that  it  may  not  constitute  an  unequal  measure  of  values, 
and  that  it  may  safely  pass  currently  from  hand  to  hand, 
without  surcharging  the  channels  of  circulation.  For, 
whenever  the  channels  of  currency  are  surcharged,  there 
will  be  an  immediate  tendency  of  the  currency  to  be  expor- 
ted ;  the  specie  only  being  exportable,  that  of  course  con- 
stitutes the  •whole  exportation.  The  pressure  upon' the 
channels  of  circulation  will  be  relieved  immediately  upon 
the  exportation  of  but  a  very  small  amount  of  specie.  The 
precious  metals  will  not  be  exported  so  long  as  stocks  of 
any  kind  can  be  sold  in  the  foreign  market  at  par,  or  bills  of 
exchange  be  purchased  to  meet  foreign  demand.  Ameri- 
can stocks  have  been  sold  in  England,  until  the  interest 
due  on  them  from  the  different  states  amounts  to  several 
millions    annually. 

Thus  the  United  States  of  America,  with  a  fertile  soil, 
salubrious,  inviting,  healthful  climate,  pure  purling  streams 
of  water,  and  immense  variety  of  superior  timber — inhabi- 
ted by  a  hardy  industrious  race  of  ec(>nomical  and  ingen- 
ious inhabitants,  have  become  tributary  to  a  nation  w^hose 
capital  is  an  irredeemable  debt  of  66800,000,000  sterling; 
and  all  through  extravagance,  induced  and  encouraged  by 
the  facilities  of  borrowing,  produced  by  the  great  number 
of  credit  paper  machines,  and  the  amount  of  pajDcr  that 
their  private  interest  induces  them  to  palm  upon  the  publicas 
money.  The  use  of  which, like  the  use  of  distilled  liquors, 
has  been  so  long  continued  in  the  U.  States,  that  business 
men  almost  fancy  they  cannot  live  without  it.  Bank  credit 
is  useful  when  properly  used  and  not  abused  ;  but,  as  dis- 
tilled spirits  should  not  be  relied  on  as  food,  although  it 
prevents  hunger,  neither  should  bank  credit  be  used  as  capi-- 


buncombe's  free  banking.  279 

tal.  Many  of  our  citizens,  from  witnessing  the  evils  of  ex- 
cessive expansions  and  contractions  of  the  currency,  have 
honestly  come  to  the  conclusion,  that  paper  money  of  any 
description  ought  never  to  be  used,  or  allowed  to  circu- 
late. We  aim  at  the  medium  course.  We  would  no 
sooner  use  bank  credit  as  capital,  than  we  would  use  distil- 
led spirits  for  food  ;  and  yet,  we  would  use  either  the  one 
or  the  other  when  necessary — that  is,  we  would  use  distil- 
led spirits  only  as  a  remedy  when  other  better  remedies 
could  not  be  found,  and  we  would  use  only  so  much  bank 
paper  as  would  barely  supply  the  deficiency  of  the  precious 
metals,  and  to  meet  the  actual  demand  for  currency  to 
transfer  the  commodities  of  the  countr}'  from  hand  to  hand. 

I  am  not  prepared  to  say,  that  it  would  not  have  been 
better  for  sober,  honest,  republican  Americans,  if  neither  dis- 
tilled spirits  nor  bank  paper  had  been  known  among  them  ; 
but  having  been  known  and  used,  and  habits  having  been 
formed  upon  their  use,  tJiey  can  hardly  be  wholly  dispen- 
sed with,  without  violence  to  society.  Unfortunately  some 
men  have  been  so  completely  consumed  by  distilled  spirits, 
that  by  instantly  withholding  it  from  them  altogether, 
they  must  sink  under  the  deprivation ;  so  there  are  some 
men  who  have  so  completely  allowed  the  banks  to  absorb 
their  whole  substance  in  bank  discounts,  and  interest  on 
notes  to  the  bank,  that  without  bank  credit  they  would 
hardly  be  able  to  continue  their  business. 

I  would  not  do  injustice  to  any,  or  subject  them  to  incon- 
veniences from  the  restriction  of  their  credits.  In  short, 
the  plan  proposed  would  rather  encourage  than  diminish 
sound  bank  credit,  and  afford  those  who  have  used  fictitious 
paper  and  bank  credit  for  capital,  time  to  wind  up  their  bu- 
siness in  the  best  manner  possible  ;  while  it  will  furnish 
them  with  a  better  currency,  and  a  more  certain  and  ssife 


280  buncombe's  free  banking. 

mode  of  transacting  business,  using  such  paper  only  as  is 
equal  to  specie  wherever  it  is  required  to  be  used. 

The  establishment  of  one  general  free  system  of  bank- 
ing throughout  the  United  States,  with  a  centralized  gov- 
ernment and  divided  administration,  would  give  the  people 
the  regulation  of  the,  monetary  affairs  of  the  country,  as 
they  have  of  their  political,  religious  or  literary  institutions  ; 
while  it  affords  them  a  mixed  currency,  with  gold  and  sil_ 
ver  for  those  who  prefer  hard  money,  and  large  bills  for 
those  to  whom  paper  money,  perfectly  convertible  and  uni- 
formly current,  is  preferable. 

This  at  first  appears  rather  hypothetical ;  but  before  we 
despair,  let  us  examine  the  subject  and  see  what  reason  we 
have  for  believing  that  giving  the  people  the  direction  of 
the  currency,  and  the  election  of  the  directors  of  the  banks 
of  discount,  would  not  restrict  the  discounts  and  direct  them 
into  their  proper  channels,  domestic  circulation,  and  there- 
by lessen  our  imports. 

ON  THE  CURRENCY  TO  BE  PRODUCED  BY  FREE  BANKING. 

The  United  States  bank  bills,  upon  the  system  of  free 
banking,  should  be  issued  to  each  state  in  proportion  to  the 
amount  of  currency  required  for  the  business  of  the  state, 
aided  by  the  specie  reserved  for  small  change.  These 
bills,  and  the  specie  upon  which  they  are  to  be  issued, 
should  be  apportioned  by  the  state  directors  between  the 
banks  of  discount,  in  each  county  or  city,  where  banks  of 
discount  are  located.  The  election  of  the  directors  of  the 
banks  of  (discount  by  the  people,  will  change  the  business 
of  the  banks,  improve  the  state  of  the  currency,  and  bene- 
fit the  exchanges.  The  directors  of  the  banks  of  discount, 
having  given  good  security  for  the  faithful  discharge  of 
ttheir  duties  ;  they  should  execute  the  bills  apportioned  to 


DtJNCOlVlBE  S  FREE  BANKING?.  2S1 

tliem  for  circulation,  and  commence  business,  by  discount- 
ing only  actual  business  paper,  having  but  short  periods  to 
run,  to  an  amount  not  exceeding  three  times  the  amount  of 
specie  actually  in  the  vaults  of  the  hank  at  the  time  of  the 
discount.  The  directors  should  be  prohibited  from  dis- 
counting any  note  or  acceptance  in  which  the  director  yf 
any  bank  had  any  interest ;  and  the  receipt  of  any  bonus, 
private  fee  or  perquisite  for  such  bank  accommodation, 
should  be  made  an  indictable  offence,  and  punishable  by 
fine  or  imprisonment. 

If  i*  self-love  be  the  spring  of  action  that  moves  the  soul,*' 
when  we  have  secured  the  private  interest  of  the  directors 
of  the  banks  in  favor  of  the  accommodation  of  the  fair  tra- 
der, he  will  be  most  likely  to  be  accommodated  to  the  les- 
sening of  the  business  of  speculators. 

The  directors  will  be  selected  for  their  skill,  ability  and 
integrity  as  financiers ;  their  securities  being  ample,  they 
will  have  no  perquisites  or  "  stealings  **  to  induce  corrupt 
conduct. 

The  directors  being  removed  from  temptation  to  fraud, 
and  receiving  such  salaries  as  would  be  sufficient  to  com- 
mand the  best  and  ablest  financiers  ^  without  making  it  an  ob- 
ject worthy  of  great  sacrifice  to  obtain  at  an  election,  will 
also  aid  in  rendering  bank  notes  sound  and  convenient. 

The  business  of  the  directors  should  be  clearly  defined, 
and  comport  with  the  public  interest.  They  would  then 
soon  learn  that  if  they  discount  a  speculator's  note  for  §50,- 
000,  although  that  might  have  been  made  more  profitable 
to  the  stockholders,  by  having  the  sum  paid  in  some  dis- 
tant market,  yet  as  this  would  deprive  them  of  the  power 
of  lending  five  hundred  dollars  each  to  one  hundred  men, 
it  would  be  more  to  the  interest  of  the  directors  to  secure 
the  votes  of  the  100  fair  traders,  than  of  the  one  speculator. 


S82  DUNCOMBE^S  t'REE  BANKING. 

They  will,  therefore,  be  most  likely  to  accommodate  the 
many,  and  let  the  speculator  have  only  an  equal  share  with 
them,  making  their  notes  payable  at  the  office  of  discount. 

Their  duties  and  interests  coinciding  with  the  wishes  of 
the  inhabitants,  they  will  do  good  to  the  greatest  numbers, 
at  the  least  danger  of  loss  or  expense,  and  preserve  the 
paper  portion  of  the  currency  convertible,  sound,  and  current 
throughout  the  Union.  Their  monthly  published  statements 
would  give  the  people,  as  well  as  the  state  directors,  the 
means  of  witnessing  their  whole  proceedings,  and  dictating 
or  preventing  any  improvidence,  peculation  or  fraud,  of  any 
bank  of  discount,  before  the  evil  could  become  extended 
and  dawgerous  to  the  institution. 

The  prices  of  all  commodities  would  be  advanced  as 
money  became  easy  ;  and  as  importations  of  foreign  mer- 
chandize ceased  to  control  the  money  of  the  country,  that 
would  become  invested  in  domestic  manufactures. 

Thus  all  classes  of  American  citizens  would  be  benefit- 
ted, financially  and  politically,  by  having  the  control  and 
regulation  of  the  currency  as  they  have  of  the  affairs  of  tho 
townships. 

The  prosperity  of  a  place,  like  the  prosperity  of  individ- 
uals, depends  more  upon  the  uniform  healthy  growth  and 
increase  of  the  business  of  the  place,  than  upon  any  tem- 
porary expansion  of  the  business  of  the  place.  For,  after 
expansions  there  will  assuredly  follow  contractions.  An  in- 
crease of  expenses  are  usual  during  expansions,  with  di- 
minished means  of  meeting  the  contractions  firmly.  For  in- 
stance :  the  man  whose  business  was  worth  to  him  $1,000 
annually,  by  excessive  temporary  expansions  of  credit  and 
business  may  have  his  profits  increased  to  $1,500  a  year. 
This  causes  him  to  relax  in  his  diligent  and  unremitted  ex- 
ertions in  acquiring  wealth,  by  which  he  looses  some  profits 


buncombe's  free  banking.  '  283 

upon  his  business,  while  his  expenses  keep  pace  with  his  in- 
creased income,  as  nearly  as  they  did  when  his  income  was 
but  $1,000.  He  rents  more  expensive  buildings  for  his  ac- 
commodations, and  most  of  his  former  savings  are  invested 
in  the  improvement  of  these  rented  premises,  the  fixtures 
of  which  cannot  be  sold,  should  he  at  once  wish  to  retrench 
his  expenses,  by  being  released  from  his  higher  rent,  which 
his  lessened  profits  may  require.  Besides  this,  his  family 
may  have  just  received  and  returned  the  visits  of  a  class  of 
citizens  of  more  leisure,  and  of  a  style  of  living  above  what 
his  former  prudence  had  justified. 

When  the  contractions  of  the  currency  reduces  his  in- 
come to  far  less  than  his  former  $1,000  a  year,  he  begins  to 
regret  his  increased  expenses,  and  would  fain  return  to  his 
former  habits  of  industry  and  economy.  He  sees  that  his 
only  safe  course  is  prompt  and  immediate  retrenchment : 
yet  this  is  opposed  by  his  own  vanity,  the  feelings  and  new 
fledged  hopes  of  his  family.  He  sees,  if  he  returns  to  his 
former  lodgings,  he  must  positively  loose  largely  in  the  re- 
linquishing the  house  he  has  but  recently  had  fitted  to  his 
taste  and  convenience,  and  in  his  new  furniture,  adapted  to 
the  place  and  situation  of  the  house.  If  he  continues  in  the 
house,  his  other  expenses  must  keep  pace  with  the  appear- 
ances he  has  commenced,  or  be  subject  to  the  unfavorable 
remarks  of  his  former  associates. 

What  is  to  be  done  1  Disgrace  must  attend  him,  sooner 
or  later,  whatever  course  he  may  take.  While  he  debates 
in  his  own  mind,  and  hesitates  what  to  do,  his  daily  increas- 
ed expenses  still  continue,  until  he  is  compelled  to  use  some 
part  of  his  business  capital  to  support  his  style  of  living,  or 
what  is  worse,  to  contract  debts  for  luxuries  which  he  feels 
he  cannot  long  maintain.  He  now  sees,  and  to  his  sorrow, 
feels,  that,  but  for  the  inflation  of  the  currency  by  the  char^ 


284  duncombe's  free  banking* 

tered  banks,  he  would  not  have  been  led  to  these  expenses, 
and  the  unnecessary  debts  he  has  incurred,  but  he  would 
have  quietly  pursued  his  former  safe  and  profitable  way  ; 
and  had  that  been  his  good  fortune,  he  would  not  now  be 
met  at  every  turn  with  the  taunts  and  sneers  that  encounter 
him  wherever  he  goes. 

His  domestic  peace  and  felicity  have  fled  with  the  failure 
of  bank  credit ;  its  discounts  have  been  checked,  and  ruin 
has  followed.  The  family  have  lost  confidence  in  each  oth- 
er's good,  and  honest  intentions.  The  house  is  divided 
against  itself :  the  wife  against  the  husband — the  children 
against  the  father,  and  the  father  against  the  children.  Bu- 
siness becomes  neglected — the  family  become  disorgani- 
zed— division  exposes  their  follies  or  weaknesses,  and  envy 
gives  new  fangs  to  scandal ;  social  intercourse  is  interrup- 
ted— domestic  happiness,  and  all  the  warm,  generous  feel- 
ings of  the  heart,  are  destroyed.  For  all  these  evils,  he 
may  thank  bank  expansions  and  unlimited  bank  credit. — 
Property  falls  in  price — wages  fall — money  rises — and  the 
banks  refuse  to  discount  paper  for  any  but  the  directors  or 
stockholders  themselves. 

The  directors  have  but  on(»-  duty  to  perform,  and  but  one 
interest  to  regulate  all  their  operations ;  and  that  is,  the 
amount  of  the  dividends  of  the  bank.  Their  business  is  to 
make  as  much  money  for  the  stockholders  as  they  lawfully 
can.  Consequently,  if  speculators  will  pay  them  in  a  dis- 
tant market,  where  the  price  of  bills  is  above  the  value  of 
money  at  the  place  of  the  discount,  they  will  accommodate 
these  speculators,  although  they  must  restrict  their  discounts 
to  their  regular  customers  to  the  same  amount.  The  only 
question  for  the  directors  to  settle  is,  which  will  be  the  most 
profitable,  and  this  can  always  be  settled  by  mathematical 
calculations.     "When  dealing  in  exchanges  will  pay  better 


DUNCOMBE'S  FREE  BANKING.  285 

tlian  discounting  the  business  paper  of  the  place,  buying 
and  selling  bills  of  exchange  becomes  the  order  of  the  day 
with  the  banks. 

The  loan  of  $50,000  and  the  payment  of  that  sum  in 
a  market  where  the  profit  upon  the  sale  of  bills  is  from 
5  to  10  per  cent,  every  ninety  days,  gives  a  clear  gain  to 
that  amount,  which  the  fair  traders  of  the  place  cannot  ex- 
pect to  compete  with.  The  only  avenues  to  the  favors  of 
banks  are  through  their  direct  interest,  as  shown  by  the 
dividends. 

Another  mode  of  increasing  the  profits  of  the  bank  is,  by 
discounting  notes  for  a  much  larger  amount  than  is  to  be 
drawn — one  half  of  the  amount,  or  such  a  proportion  as  can 
be  agreed  upon,  being  left  in  the  bank  as  a  deposite  ;  in- 
creasing the  profits  of  the  bank  fifty  per  cent,  and  showing, 
upon  inspection  by  commissioners  from  the  legislature,  a 
fair  exhibit. 

Well,  we  have  before  seen,  that  in  the  people's  republi- 
can free  bank,  the  directors  would  be  governed  by  directly 
the  opposite  principles.  They  would  not  have  loaned  so 
large  a  sum  to  foreign  speculators,  for,  with  directors  elec- 
ted by  the  people,  their  ability  to  aid  them  in  their  election 
would  be  trifling,  when  compared  with  the  votes  of  fifty 
or  one  hundred  regular  dealers  of  the  place,  who  must 
have  been  disappointed  in  their  discounts,  and  consequent- 
ly in  their  business,  by  the  accommodation  of  these  specu- 
lators, because  they  could  or  would  pay  the  bank  in  a  dis_ 
tant  place,  where  bills  drawn  by  the  banker  for  the  amount 
would  be  worth  ten  times  the  profits  on  the  loan  of  the 
same  amount  of  money  to  regular  dealers.  Besides  this, 
the  directors  of  the  people's  bank  would  be  liable  to  be 
reprimanded  for  departing  from  the  regulations  of  the  bank 
in  accommodating  the  few  to  the  exclusion  of  the  many. 


28G  buncombe's  tree  banking* 

These  regulations  should  be  clear  and  definite  ;  simply 
requiring  the  directors  to  discount  only  safe  actual  business 
paper,  having  but  short  periods  to  run,  in  which  no  director 
has  any  interest. 

One  of  the  decided  advantages  of  separating  currency 
from  private  interest  is,  the  direction  of  currency  into  its 
legitimate  channels,  that  whatever  profit  is  made  upon  the 
business  of  supplying  the  public  with  a  circulating  medium 
should  go  into  the  right  pockets. 

The  pervertion  of  the  business  of  banking  to  that  of  bro- 
kerage, would  be  such  an  infringement  of  their  regulations 
as  to  subject  them  to  an  investigation  before  the  state  direc- 
tors, and  leave  themselves  and  their  bail  accountable  for 
their  malversation. 

Bankers  should  never  lend  money  with  the  view  of  aiding 
speculators  ;  as  they  firstly  borrow  all  the  money  that  the 
banks  have  to  lend,  then,  having  monopolized  the  money 
of  the  place,  they  monopolize  the  business  of  the  place,  in- 
jure the  fair  trader,  the  producer,  and  the  business  of  the 
country,  for  the  benefit  o£  themselves  and  the  banker.  For 
he  who  gets  large  loans  can  regulate  the  price  of  the 
commodities  he  is  purchasing.  The  farmer,  therefore, 
really  often  receives  less  money  for  his  beef,  pork,  wheat 
or  flour,  than  he  would  have  received  from  the  regular  bu- 
siness men  of  the  place,  had  the  regular  discounts  of  the 
banks  not  been  interfered  with.  One  speculator,  with  fifty 
thousand  dollars,  will  be  less  likely  to  raise  the  price  of 
commodities,  than  fifty  speculators,  with  the  same  amount 
of  money  divided  between  them.  Prices  may,  however, 
be  temporarily  advanced  by  speculators  ;  but  suppose  they 
pay  ten  per  cent,  advance  upon  the  regular  prices  for  the 
articles  they  purchase ;  suppose  they  purchase  wheat,  and 
that,  in  consequence  of  their  monopolizing  the   money  of 


buncombe's  free  banking.  287 

tlie  place,  the  price  of  wheat  should  be  advanced  ten  per 
cent.,  this  would  appear  at  first  sight  to  be  so  much  actual- 
ly in  the  pockets  of  the  farmers,  but  when  it  is  recollected 
that  so  much  of  the  money  as  is  monopolized  by  the  wheat 
speculator  is  abstracted  from  the  purchase  of  other  com- 
modities, it  will  appear  plain  that  the  price  of  other  articles 
must  be  depreciated  in  just  the  same  proportion  that  the 
price  of  wheat  is  advanced.  Hence  we  see  again,  that 
loaning  large  sums  to  speculators,  if  they  do  advance  the 
prices  of  some  articles,  they  diminish  the  prices  of  other  ar- 
ticles in  a  still  greater  proportion. 

We  have  before  stated,  that  regular  prices,  in  good  mon- 
ey, in  hand  paid,  even  although  the  price  be  somewhat 
lower,  is  far  better  than  the  same  amount  of  money,  ex- 
pended in  high  prices  for  some  articles  and  lessened  prices 
for  other  articles,  accompanied  with  uncertainty.  This  may 
be  thus  illustrated  :  The  farmer,  finding  that  wheat  pays  a 
profit  of  ten  per  cent  more  than  any  other  commodity  this 
year,  very  probably  makes  the  growth  of  wheat  his  princi- 
pal article  of  farming  for  exportation  for  the  next  year, 
when,  to  his  surprise,  he  finds  the  price  of  wheat  very  low, 
that  there  are  no  speculators  in  the  wheat  market  this  year. 
The  price  of  wheat  the  preceding  year  having  been  advan- 
ced above  its  real  value,  did  not  pay  as  well  as  many  other 
articles  of  produce  to  its  dealers ;  and  hence  fewer  persons 
engage  in  the  speculation  of  wheat  the  ensuing  years.  The 
farmer  has  not  the  usual  quantity  of  other  commodities  for 
sale,  and  the  price  of  wheat  is  as  much  below  par  this 
year  as  it  was  last  year  above  par,  while  his  expenses  have 
been  increased  to  keep  pace  with  his  expected  large  crop, 
and  high  price  of  wheat ;  he  finds  himself  involved  in 
debt  and  ruin.  He  may  charge  the  whole  of  his  misfor* 
tunes  to  interested  temporary  expansions  of  the  currency 
h^  chartered  banks. 


288  j>x;ncombe's  free  banking. 

Private  interest,  unlimited  credit,  and  limited  individual 
responsibility t  connected  with  the  issue  of  paper  to  circu- 
late as  money,  as  they  exist  in  chartered  banks,  must  pro- 
duce expansions  of  the  currency  in  times  of  prosperity,  to 
be  followed  by  consecutive  contractions  in  times  of  ad- 
versity. 

The  directors,  being  only  responsible  to  the  stockhol- 
ders, whose  interest  is  not  the  same  as  that  of  the  other  in- 
habitants of  the  place,  the  stockholders  must  be  profited, 
although  the  inhabitants  should  be  ruined.  The  laws  of 
their  situation  compel  them  to  make  as  large  dividends  as 
they  legally  can. 

But  change  the  interest  of  the  bank  directors,  by  chang- 
ing their  electors — let  them  be  elected  by  the  people  in- 
stead of  the  stockholders — will  not  the  same  men  use  the 
same  zeal  and  diligence  in  serving  their  new  electors  faith- 
fully, that  they  formerly  have  in  serving  their  old  electors  ? 
If  they  are  as  well  paid  they  undoubtedly  will.  The  new 
electors  will  have  one  common  interest  with  the  directors, 
that  of  doing  the  most  good  to  the  greatest  number,  at  the 
least  expense  ;  and  this  interest  and  these  principles  must 
govern  the  business  of  the  banks  that  furnish  a  sound  cur- 
rency, and  plenty  of  it. 

The  sole  business  of  bankers  is  to  make  money  for  them- 
selves, upon  the  investment  of  their  capital  in  bank  stock. 
This  has  been  repeated  and  may  be  repeated,  "  line  upon 
line  and  precept  upon  precept,"  and  yet  not  appear  to  be 
sensibly  brought  to  the  full  knowledge  of  manldnd.  Bank- 
ers are  blamed  for  not  doing  more  business.  They  are 
blamed  for  not  lending  more  credit.  Then  they  are  bla- 
med for  not  redeeming  what  they  have  loaned.  If  the  di- 
rectors were  chosen  by  the  people,  and  accountable  to 
them  for   their  conduct,  the  public  could  hardly  be  more 


duncombe's  free  banking.  S8& 

censorious  upon  bank  directors  than  they  frequently  are 
now.  I  do  not  complain  of  the  bankers,  the  stockholders, 
or  the  directors.  They  are  perfectly  consistent  in  their  bu- 
siness. They  are  governed  in  all  their  operations  by  the 
laws  of  their  situations.  Their  love  of  money  is  not  exclu- 
sively or  peculiarly  the  weakness  or  property  of  bankers — 
it  is  common  to  human  nature  ;  and  if  the  government 
gives  them  exclusive  privileges  for  their  private  interest 
and  aggrandizement,  is  it  at  all  remarkable  that  they  should 
exercise  their  privileges  during  the  short  time  they  are 
likely  to  be  allowed  to  enjoy  them  to  the  best  advantage  % 
Credit  ever  has  its  ebbings  and  flowings  ;  and  like  the  tides 
that  follow  closely  behind  the  moon,  so  does  American 
credit  follow  foreign  exchanges,  with  this  very  material 
difference,  however,  that  the  full  and  neap  tides  occur  at 
regular  periods,  and  may  be  anticipated,  and  their  danger- 
ous effects  guarded  against,  while  credit  bank  paper  is 
equally  fluctuating,  but  far  less  regular  and  certain  in  its 
fluctuations. 

To  have  a  sound  currency  in  a  republican  country,  the 
people  must  elect  the  directors  of  their  banks  from  among 
themselves.  They  must  be  persons  whose  interests  are 
identical  with  the  people,  and  who  can  by  no  possibility 
have  any  private  interest  in  the  discounts  of  the  bank.  A 
careful  supervision  of  trie  banks  of  discount  by  the  state 
banks,  with  full  monthly  published  statements  of  the  busi- 
ness of  the  banks,  would  soon  correct  the  defects  of  the 
paper  currency,  that  are  so  loudly  complained  of  by  all  par- 
ties not  interested  in  the  abuses  of  public  confidence,  daily 
experienced  by  holders  of  bank  notes  and  dependants 
upon  bank  credits  for  their  business. 

The  United  States,  to  remain  independent,  must  estab- 
lish a  sound  currency.     They  must  be  released  from  debt. 


290  buncombe's  free  banking. 

They  must  reduce  their  imports  to  the  par  exchange  of 
their  exports.  They  must  establish  a  standard  measure  of 
all  values,  as  immutable  and  uniform  as  our  weights  and 
measures.  They  must  provide  for  the  election  of  the  di- 
rectors of  the  banks  by  the  political  electors  of  the  country, 
as  freely  and  independently  as  the  election  of  township  of- 
ficers are  provided  for  by  the  laws  of  the  states.  The  cur- 
rency must  be  based  exclusively  upon  the  precious  metals, 
and  rendered  uniformly  perfectly  interchangeable.  The 
discounts  must  be  restricted  to  actual  business  paper,  hav- 
ing but  short  periods  to  run.  In  short,  the  issue  of  bank 
paper  intended  to  circulate  as  money,  should  be  so  conduc- 
ted, as  to  render  it  equally  current  with  gold  and  silver  in 
every  part  of  the  Union,  and  as  easily  to  be  obtained  as 
any  other  commodity  ;  and  such  a  system  is  intended  to  be 
the  one  proposed.  Enquiry  is  important  to  the  tliorough 
knowledge  of  the  currency,  and  to  its  necessary  and  perfect 
reform.  Let  those  who  have  leisure  and  ability  engage 
in  the  important  task,  and  it  will,  it  must  be  accomplished. 


CHAPTER  XLI. 
SAFETY  FUND. 

THE  SAFETY  FUND  PRINCIPLE  ADAPTED  'IQ  FREE  BANKING. 

In  the  plan  herein  proposed,  the  safety  fund  principle  is 
well  adapted  to  the  preservation  of  that  equiUbrium  and 
uniformity  of  circulation  so  eminently  desirable  in  the  cir- 
culating medium. 

The  dividends  to  be  made  to  the  stockholders,  being 
made  from  the  whole  profit  of  all  the  banks  of  discount 
Collected  and  summed  up,  firstly  by  the  state  directors  of 


DUNCOMBE*S  FREE  BANKING.  291 

each  state,  and  finally  by  the  United  States  directors,  from 
the  returns  made  to  each  state  by  the  banks  of  discount, 
and  transmitted  to  them  through  the  state  directors,  there 
will  be  no  jealousy  of  the  prosperity  of  the  institutions  of 
one  state  over  those  of  another,  nor  of  the  success  of  one 
bank  of  discount  of  a  state  over  the  other  banks  of  the 
same  state.  Thus  the  United  States  directors  might  order, 
that  the  safety  fund  principle  be  applied  to  all  the  banks  ; 
that  a  given  sum  be  preserved  for  a  safety  fund,  and  prof- 
itably disposed  of,  as  the  safety  funds  of  the  safety  fund 
banks  of  the  state  of  New  York  are  at  this  time  employed, 
or  in  such  other  profitable  manner  as  they  may  deem  proper. 

To  the  stockholders,  this  fund  would  only  be  a  reserved 
profit,  ultimately  to  be  enjoyed  as  a  bonus  and  not  a  loss  to 
the  public.  It  would  still  be  so  much  capital  for  general 
business  purposes,  whether  used  as  any  portion  of  the  cur- 
rency, or  otherwise.  The  stock,  being  all  bought  and  paid 
for  in  specie,  delivered  to  the  directors  of  each  state,  sub- 
ject to  the  apportionment  by  the  United  States  directors 
between  the  several  states,  to  be  by  the  state  directors  ap- 
portioned between  the  banks  of  discount  in  each  state 
(the  coin  would  not  all  require  to  be  moved  from  place  to 
place,  the  balances  only  would  require  actual  transporta- 
tion.) This  would  enable  one  or  more  banks,  upon  this  plan, 
to  go  into  immediate  operation,  that  the  stockholders  might 
not  loose  their  dividends  from  the  time  of  the  first  payment, 
until  the 'whole  business  of  the  country  would  ultimately  be 
conducted  upon  this  general  free  banking  system. 

That  capitalists,  desirous  only  of  increasing  their  capital 
profitably,  safely  and  honorably,  would  prefer  stock  in  this 
general  United  States  bank,  there  can  be  but  little  doubt. 
But  that  speculators,  who  have  long  made  money  by  shaving 
Qjid   passing  uncurrent   money   upon  the  public    at   par, 


29^  DITNCOMBE^S  FREE  BANKING. 

and  by  buying  it  again  below  par,  through  the  agency  oF 
their  brokers,  will  be  violent  against  this  system,  there  can 
be  as  little  reason  to  hope.  Their  craft  Is  in  danger.  Sharks 
in  the  business  of  brokers,  and  black-legs  in  the  gambling 
of  the  currency,  succeed  best  with  the  most  defective  sys- 
tems of  currency,  and  plunder  the  public  with  most  facili- 
ty during  times  of  fluctuations  of  the  currency,  suspensions 
of  specie  payments  by  the  banks,  and  oppressive  contrac- 
tions. As  the  proposed  plan  is  intended  to  obviate  and  pre- 
vent these  evils  of  the  currency,  this  class  of  citizens  may 
be  expected  to  withhold  their  funds  from  the  institution. 

The  habits  of  the  American  people  of  **  going  ahead  " 
with  whatever  they  undertake  to  do,  renders  a  sound  cur- 
rency more  indispensably  necessary  in  the  United  States, 
than  in  most  other  countries ;  for  they  earn  money  with  all 
their  might,  and  with  all  their  powers  of  body  or  mind,  and 
when  they  have  earned  it,  no  people  ever  spend  it  more 
freely,  or  enjoy  it  better  while  they  have  it  to  spend  ;  no  ob- 
ject of  charity  but  what  receives  their  kindest  private  bles- 
sing and  public  munificence.  To  lessen  this  diffusive  hab- 
it, and  to  restrict  the  exhuberance  of  their  passions  for 
amusements,  and  for  show  and  parade,  the  precious  metals 
are  far  preferable  to  credit  bank  paper  money.  But  there 
is  a  force  and  energy  of  character  peculiar  to  Americans, 
that  should  never  be  repressed  or  crushed.  All  the  ele- 
mentary principles  of  the  government,  except  that  of  cur- 
rency, promote  and  encourage  it.  Currency,  on  the  con- 
trary, is  aristocratic,  illiberal,  exclusive,  partial  and  uncer- 
tain. 

The  second  sober  thought  of  Americans  is  always  cor- 
rect. As  soon  as  they  can  find  leisure,  from  the  hurry  of 
passing  their  doubtful  chartered  bank  notes,  lest  the  banks 
should  fail  while  the  notes  are  in  handj,  they  will  see  that 


buncombe's  free  banking.  293 

there  is  some  radical  defects  in  tlie  present  paper  portion  of 
the  currency,  and  in  good  earnest  set  about  discovering 
and  remedying  them.    . 


CHAPTER  XLII. 

ON  THE  NEW-YORK  GENERAL  BANKING  LAW, 

The  law — 12i  cents  in  the  dollar  in  specie — 87J  cents  in  credit — ^Advantages — ^Dis- 
advantages. 

This  law  has  established  a  new  era  in  banking  in  the  Uni- 
ted States.  It  has  substituted  public  debts,  and  mortgages 
on  lands,  in  part,  for  a  basis  upon  which  to  issue  paper  to 
circulate  as  money ;  twelve  and  a  half  per  cent,  only  of  the 
amount  of  notes  in  circulation,  being  •by  this  law  required 
to  be  kept  in  the  business  of  the  bank  in  specie. 

It  is  true,  that  from  the  tenor  of  the  law,  one  would  be 
led  to  view  the  governmetit  bonds  and  mortgages,  pledged 
to  the  Comptroller  of  the  state  in  security  to  the  bill-holder 
for  the  redemption  of  the  bills  as  collateral  security,  and  be 
led  to  infer,  that  the  ordinary  security  of  incorporated  banks 
to  the  bill-holder  remained  unchanged,  and  that,  therefore, 
the  bills  of  the  New  York  General  Banking  Law  system 
were  doubly  secure.  But  here  is  the  fallacy  :  incorporated 
banks  are  only  allowed  to  issue  three  times  the  amount  of 
paper  money  that  they  have  specie,  or  paid  up  capital,  while 
the  New  York  General  Banking  Law  allows  the  directors 
of  banks  established  under  it,  to  issue  eight  times  as  much 
bank  paper  to  circulate  as  money,  as  they  are  required  to 
have  of  specie  in  their  vaults  ;  and  upon  their  failing  to  re- 
deem their  notes  in  specie,  the  twelve  and  a  half  per  cent. 


294  dtjncombe's  free  banking. 

is  no  part  of  the  security  to  the  bill-holder,  as  the  associa- 
tions are  expressly  released  from  all  responsibility  for  the  re- 
demption of  their  notes,  or  for  costs*  The  property  of  the 
association,  and  the  security  pledged  with  the  Comptroller 
for  the  redemption  of  the  bills  of  the  bank,  are  the  whole 
of  the  security  to  the  bill-holder. 

The  security  for  the  bill-holder,  given  to  the  Comptrol- 
ler of  the  state,  may  consist  of  any  portion  of  the  public 
debt  of  the  United  States,  or  of  any  individual  state,  equal 
to  New  York,  state  five  per  cent,  stocks  ;  for  which  the 
Comptroller  shall  deliver  to  the  person,  or  association  of 
persons,  an  equal  amount  of  bills  in  blank,  which  he  shall 
have  procured  in  the  best  form,  to  prevent  counterfeiting, 
countersigned,  numbered,  and  registered  in  proper  books, 
bearing  the  uniform  signature  of  such  registerer.  Or  the 
person,  or  association  of  persons,  niay,in  part,  pledge  lands  in 
the  state  of  New  York,  by  transferring  to  the  Comptroller 
bonds  and  mortgages  upon  real  estate,  bearing  at  least  six 
per  cent,  interest,  to  double  the  amount  of  bills  received 
for  circulation  upon  this  security ;  and  after  the  person  or  as- 
sociation shall  have  executed  the  bills,  making  them  paya- 
ble in  specie  at  sight,  at  the  place  where  they  are  to  be  put 
^n  circulation,  they  may  be  passed  and  circulated  as  money. 
The  depositor  may  receive  interest  on  the  debts  or  mortga" 
ges  pledged,  so  long  as  he  redeems  the  notes  for  which  the 
security  is  held,  and  no  longer. 

The  provisions  of  the  New  York  General  Banking  Law, 
will  be  better  comprehended  from  tlie  following  synopsis  of 
the  law. 

The  law  authorises  the  Comptroller  to  cause  to  be  engraved  and 
printed,  in  the  best  manner,  to  guard  against  counterfeiting,  such 
quantity  of  circulating  notes,  in  the  similitude  of  bank  notes,  in 
blank,  of  the  diiferent  denominations  authorised  by  law,  as  he  may 


DUNCOMBfj's  PHEE  BANKING.  295 

deem  necessary ;  and  he  shall  cause  the  same  to  be  countersigned, 
numbered  and  registered,  in  proper  books  provided  for  that  pur- 
pose ;  and  each  note  shall  bear  the  uniform  signature  of  aregisterer. 

Whenever  any  person,  or  association  of  persons,  formed  for  the 
purpose  of  banking  under  the  provisions  of  this  act,  shall  legally 
transfer  to  the  Comptroller  any  portion  of  the  public  debt  of  the 
state  of  New  York,  or  of  any  other  state,  or  of  the  United  States, 
equal  to  five  per  cent,  stocks  of  the  state  of  New  York, 

The  person  or  association  transferring  the  same,  shall  be  entitled 
to  receive  from  the  Comptroller,  an  equal  amount  of  such  circula- 
ting notes,  of  different  denominations,  countersigned,  numbered  and 
registered  as  aforesaid. 

Such  person  or  association  of  persons  are  authorised,  after  hav- 
ing executed  such  notes,  so  as  to  make  them  payable  on  demand  at 
the  place  where  they  are  issued,  within  the  state  of  New  York,  to 
loan  and  circulate  the  same  as  money. 

In  case  such  person  or  association  of  persons,  shall  fail  or  refuse 
to  redeem  such  notes  in  the  lawful  money  of  the  United  States, 
when  demanded,  according  to  law,  the  holder  of  such  notes  may 
cause  them  to  be  protested  for  non-payment  by  a  Notary  Public  ; 
and  the  Comptroller,  upon  receiving  and  filing  such  protest,  after 
notifying  the  maker  of  the  same,  if  the  maker  shall  omit  to  pay  the 
same  for  ten  days  afierthe  notice,  the  Comptroller  shall  give  notice 
in  the  state  paper,  that  all  the  circulating  notes  of  such  person  or 
association  will  be  redeemed  out  of  the  trust  funds  in  his  hands  for 
that  purpose  ;  which  he  shall  do,  together  with  costs  of  suit. 

The  depositor  may  receive  the  interest,  or  dividends  of  the  stock, 
unless  they  shall  fail  to  redeem  their  notes,  or  unless  the  stocks  de- 
posited shall  not  be  deemed  by  the  Comptroller  sufficient  security 
for  the  circulating  bills. 

The  Comptroller  may  change  the  bonds  to  make  the  bill-holder 
more  secure. 

Or  in  lieu  of  receiving  such  slocks,  the  Comptroller  may  receive 
security  for  one-half  of  the  amount  of  bills  so  to  be  issued,  by  hav- 
ing mortgages  on  productive  improved  lands,  yielding  not  less  than 
six  per  cent,  per  annum,  assigned  to  him  for  twice  the  amount  of 
bills  issued  upon  such  security. 

The  persons  assigning  such  mortgages  to  the  Comptroller,  may 
receive  the  interest  on  the  same,  unless  upon  default  to  redeem 
their  notes  or  secure  the  bill-holder  as  aforesaid. 


296  buncombe's  free  banking^ 

The  plates,  dieSj  and  materials  procured  by  the  Comptroller  for 
the  printings  of  such  notes,  shall  remain  with  him  and  be  paid  for 
out  of  the  St<\te  Treasury,  and  be  reimbursed  by  a  per  centage  on 
such  notes  sufficient  for  that  purpose. 

The  aggregate  amount  of  such  association  shall  not  be  less  than 

Sioo,ooo. 

Any  association  may  provide  for  an  increase  of  their  capital  and 
the  number  of  their  associates. 
The  association  shall  be   capable  of  sueing  and  being  sued,  but 

THEIR  JOINT  PROPERTY  ONLY  SHALL  BE    HELD  LIABLE  FOR  THE  DEBTS  OP 

THE  ASSOCIATION,  uuless  their  articles  of  association  shall  declare  , 
Otherwise. 

Such  association  shall  make  out  and  verify,  under  oath,  to  the 
Comptroller,  a  full  statement  of  the  affairs  of  the  association  in 
January  and  July  annually. 

Which  statement  shall  contain 

The  amount  of  capital  stock  paid  or  secured  to  be  paid  ; 

The  value  of  the  real  estate  of  the  association,  specifying  what 
portion  is  occupied  as  necessary  to  the  transaction  of  the  business 
of  the  association ; 

The  shares  of  stock  held  by  the  association,  whether  absolutely 
or  as  collateral  security  ;  specifying  the  number  and  value  of  each 
kind  and  description  of  stock,  and  the  number  and  value  of  the 
shares  of  each  ; 

The  amount  of  debts  due  the  association,  particularizing  from 
whom  due,  and  how  secured,  and  the  amount  that  ought  to  be  inclu- 
ded in  the  computation  of  losses; 

The  amount  of  debts  due  by  such  association,  specifying  such  as 
are  payable  on  demand,  and  such  as  are  due  to  monied  or  other  cor- 
porations or  associations; 

The  amount  of  claims  against  the  association  not  acknowledged 
by  its  debts; 

The  amount  of  notes,  bills,  or  other  evidences  of  debt,  issued  by 
such  association ; 

The  am.ount  of  its  losses,  and  statement  of  its  dividends,  during 
the  same  period  ; 

The  average  amount  in  each  month,  during  the  preceding  six 
months,  of  the  debts  due  and  specie  possessed  during  each  month  ; 
the  amount  of  notes  put  in  circulation  as  money,  and  outstanding 


dvncombe's  free  banking.        297 

on  the  first  day  of  each  of  the  six  months  j 

The  amount  due  the  association  from  the  share-holders ; 

The  names  of  all  the  parties  that  may  have  been  added,  or  may 
have  withdrawn,  and  the  amount  of  increased  capital  during  the 
last  six  months. 

The  Comptroller  shall  publish  monthly  statements  of  the  associ- 
ation. 

The  officers  shall  keep  a  list  of  the  names  of  the  share-holders, 
and  shall  file  a  copy  of  such  list  in  the  office  of  the  clerk  of  the 
county,  and  in  the  office  of  the  Comptroller,  on  the  first  Mondays  of 
January  and  July,  in  every  year. 

The  association  shall  not  make  notes  of  a  less  denomination  than 
one  thousand  dollars,  payable  at  any  other  place  than  at  the  office 
where  the  business  of  the  association  is  carried  on  and  conducted. 

They  shall  not  have  less  than  twelve  and  a  half  per  cent,  in  spe- 
cie in  their  vaults  for  more  than  twenty  days  at  any  one  time. 

This  synopsis  of  the  New  York  General  Banking  law, 
evinces  a  desire  on  the  part  of  the  legislature  to  secure  the 
bill-holder.  How  well  they  have  succeeded  we  will  con_ 
sider  hereafter,  and  time  will  show. 

This  system  however  has  its  advantages.  It  gives  less 
immediate  power  of  expansion  of  the  currency  to  the  banks 
of  discount.  It  separates  the  private  interest  of  the  banks  of 
discount  from  the  bank  of  issue,  (as  the  Comptroller's  office 
may  not  inappropriately  be  styled.)  It  furnishes  a  unifor- 
mity of  currency  throughout  the  state,  and  a  uniformity  of 
bills  for  circulation,  in  their  engravings,  and  printings,  and 
in  certain  parts  of  their  execution,  bearing  the  uniform  sig- 
nature of  the  registrar,  numbering,  and  countersigning.  And 
the  system  furnishes  a  better  representative  of  property  than 
the  incorporated  bank  system  does,  but  whether  its  bills 
more  nearly  resemble  the  precious  metals  than  the  bills  of 
incorporated  banks  remain  to  be  tested. 

The  proposed  plan  provides  for  a  still  greater  uniformity 
of  the  bills,  especially  in  their  execution,  and  for  their  uni- 


29B  buncombe's  free  banking. 

form  general  current  circulation  throughout  the  several 
states  of  the  Union.  Hence,  if  there  are  advantages  in  the 
uniformity  of  circulation  throughout  one  state,  the  proposed 
plan  extends  these  benefits,  with  superior  force,  throughout 
the  Union ;  and  provides  for  a  still  more  perfect  similarity 
of  all  the  bills  of  circulation  throughout  the  Union. 

The  bills  of  the  same  denomination  should  be  precisely 
similar  throughout  their  engraving  and  printing,  and  have 
the  uniform  signatures  of  the  United  States  directors  ;  and 
possessing  the  advantage  in  each  state  of  being  countersigned 
by  the  State  directors ;  after  which,  the  directors  of  each 
bank  of  discount  should  execute  them,  making  them  re- 
deemable in  specie  at  sight  at  the  bank  of  discount  where 
they  were  put  in  circulation. 

This  similarity  of  the  bills  of  circulation  throughout  the 
Union,  would  enable  commercial  men  to  judge  of  the  truth 
or  forgery  of  any  bill  from  any  bank  of  discount,  in  any 
state  of  the  Union,  almost  as  well  as  they  could  judge  of  the 
bills  of  his  own  state.  This  would  faciliate  the  extension 
of  the  circulation,  and  equalize  it  throughout  the  Union,  and 
thereby  give  the  paper  portion  of  the  money-currency  a 
more  perfectly  metalic  character. 

Whenever  a  paper  currency  can  once  assume,  through- 
out the  Union,  a  perfectly  metalic  character  for  convertibil- 
ity, (and  the  proposed  plan,  well  conducted,  must  give  the 
currency  that  character,)  the  bills  of  these  banks  will  be 
equal  to  specie  in  the  amounts  in  which  they  are  issued  for 
domestic  circulation  and  business,  and  preferable  to  specie 
for  making  remittances.  The  immense  saving  that  a  uni- 
form currency  throughout  the  Union  would  be  to  the  public, 
is  quite  incredible,  and  can  only  be  estimated  by  observing 
the  great  number  of  brokers,  who  amass  large  fortunes  rap- 
idly in  every  part  of  the  Union  by  "  shaving"  the  public, 


duncombe's  free  banking.  299 

that  Is,  by  exchanging  the  money  of  one  place  for  that  of 
another,  or  by  selling  current  bankable  money  to  those  who 
have  payments  to  make  in  the  banks,  or  to  some  public  of- 
fice, or  to  some  particular  individual,  v^here  the  currency  of 
the  place,  for  barter,  for  produce,  or  for  merchandize,  will 
not  be  received,  and  by  charging  a  per  centage  on  the  ex- 
change for  the  accommodation. 

An  important  feature  of  the  New  York  General  Banking 
law,  is  the  separation  of  the  power  of  issuing  paper  to  cir- 
culate as  money,  from  the  power  of  discounting  notes  and 
putting  them  in  circulation  ;  or, in  other  words,  in  separating 
the  bank  of  issue  from  the  banks  of  discount.  Thus  remo- 
ving the  power  of  increasing  the  issues,  upon  any  tempora- 
ry excitement  or  prosperity,  or  upon  the  occasion  of  great 
demand,  or  of  great  temporarily  inpTf^asfirl  ability,  as  upon 
the  receipt  of  a  large  public  or  private  deposite,  from  the 
control  of  the  directors  of  the  banks  of  discount  to  officers 
of  issue,  altogether  free  from  the  private  interest  of  the  as- 
sociation of  discount,  or  sympathy  with  the  borrower,  whose 
situations  may  safely  be  considered  by  the  credit  dealers  of 
the  country,  but  who  should  never  influence,  in  the  slightest 
degree,  the  money-currency  of  the  country.  This  sympa- 
thy, together  with  the  hope  of  gain  by  stockholders  of  in- 
corporated banks,  induces  an  increase  of  circulation  to 
meet  any  emergency  or  chance  for  gain  ;  thereby  inflating 
the  currency  of  the  place  to  the  amount  of  the  increased  is- 
sues, to  be  followed  by  an  equal  or  greater  excess  of  con- 
traction, and  extended  ruin.  The  greatest  habitual  evil  of 
incorporated  banks  is,  their  excessive  expansions  of  the 
currency  and  consequent  ruinous  contraction^,  with  their  oc- 
casional suspensions  and  inconvertibility  of  their  paper. 

The  continued  free  and  uniform  convertibility  of  paper, 
to  circulate  as  money,  is  never  to  be  lost  sight  of  while 
speaking  of  currency. 


300  buncombe's  free  banking. 

Suppose  that  the  New  York  General  Banking  law  should, 
from  its  apparent  better  security  to  the  bill-holder,  obtain 
the  entire  control  of  the  currency  of  the  state,  and  its  bills 
be  extended  and  circulated  through  every  ramification  and 
channel  of  business  in  the  state  of  New  York,  and  in  the 
adjoining  states ;  and  that  the  interest  of  the  different  asso- 
ciations should  become  such  as  to  induce  a  mutual  forbear- 
ance in  the  demand  of  specie  to  redeem  balances  in  each 
other's  hands,  and  thus  the  currency  of  the  state  should  be 
inflated  until  there  would  be  in  circulation  eight  times  as 
much  paper  money  as  there  would  be  specie  in  the  state, 
their  provision  for  the  redemption  of  their  notes  in  the  cities 
of  New  York  or  Albany,  which  at  first  required  only  a 
small  portion  of  the  twelve  and  a  half  per  cent.,  by  law  re- 
quired to  be  kept  as  a.  specie  basis  to  bank  upon,  would 
soon  require  to  be  greatly  increased,  and  daily  remittances 
for  that  purpose  would  become  often  necessary  to  meet  the 
fluctuations  in  trade  in  a  large  city  like  New  York,  inti- 
mately connected  with  foreign  commerce,  and  transacting 
daily  an  immense  business  upon  credit.  This  must  be  fol- 
lowed by  corresponding  contractions  of  the  discounts  of  the 
several  banks  ;  and  some  of  them,  failing  to  meet  their  city 
redemptions,  would  find  themselves  shortly  after  in  the 
hands  of  the  Comptroller  of  the  state,  and  their  liabilities  in 
the  hands  of  the  Sheriff.  , 

Suppose,  at. the  same  time,  any  casualty  unfavorable  to 
the  trade  of  the  Union,  or  to  the  sale  of  American  stocks  in 
England,  should  produce  such  a  reversion  in  trade,  and 
such  an  advance  in  the  rate  of  exchange,  that  specie  should 
be  demanded  for  exportation  to .  meet  the  interest  on  the 
large  debt  already  contracted  in  England,  what  would  be 
its  effects  on  a  currency  consisting  of  only  12  J  cents  in  the 
dollar  in  specie,  and  87  J  cents  in  the  dollar  of  inconvertible 


duncombe's  free  banking.  301 

credit  1  For  here,  let  me  remark,  that  the  balance  of  trade 
between  two  countries,  is  a  balance  between  the  individu- 
al merchants  of  the  two  countries,  and  may  be  said  never 
to  be  settled.  Thus  if  all  the  imports  and  exports  were  en- 
tered at  the  Customs,  which  probably  is  not  the  case,  there 
would  be  no  great  difficulty  in  ascertaining  the  state  of  the 
trade  between  the  two  countries ;  but  as  money  is  frequent- 
ly conveyed  in  trunks,  and  about  the  persons  of  individuals, 
and  as  drafts,  checks,  bills  of  exchange,  and  various  eviden- 
ces of  debt  are  transmitted  from  one  country  to  another, 
without  any  entry  of  them  being  made  either  upon  the  clear- 
ance or  entry  of  the  vessel,  the  only  feasible  mode  of  judg- 
ing of  the  balance  of  trade  between  two  countries  is  by  the 
rate  of  exchange  between  those  countries ;  and  this  is  not 
by  any  means  a  very  definite  method,  as  there  are  numerous 
causes  that  induce  a  rise  or  fall  in  the  rate  of  exchange  be- 
tween two  countries,  independent  of  the  immediate  com- 
merce between  them ;  there  are  also  causes  that  give  the 
rate  of  exchange,  as  reported,  to  differ  widely  from  what 
the  actual  exchange  between  the  two  countries  is ;  thus  the 
rate  of  exchange  between  the  United  States  and  England, 
when  quoted  a9jper  cent,  in  favor  of  England,  is  really 
at  par,  owing  to  causes  quite  unconnected  with  the  actual 
amount  of  exports  or  imports  of  the  two  countries. 

THE  RATE  OF  EXCHANGE  AND  DESCRIPTION  OF  BARTER. 

The  rate  of  exchange  may  be  varied  by  the  sale  of  the 
public  bonds  of  one  country  in  the  money  market  of  the 
other ;  and  where  the  balance  of  trade  has  been  created  by 
Euch  a  sale,  it  is  against  the  country  making  the  purchase. 

This  has  been  the  situation  of  the  trade  between  Eng- 
land and  the  United  States,  during  the  sale  of  American 
stocks  in  the  English  market. 


30^  ©uncombe's  free  banking. 

Yet,  as  tlie  rate  of  exchange  between  the  two  countries, 
independent  of  the  sale  of  public  stocks,  was  bo  largely 
against  the  United  States,  from  the  immense  importa- 
tions of  British  manufactures,  that  the  sale  of  public 
stocks  in  England,  within  the  last  few  years,  even  to 
the  amount  of  two  or  three  millions  of  dollars,  did  not  raise 
the  rate  of  exchange,  or  produce  a  balance  of  trade  against 
England  with  the  United  States,  at  any  one  time  to  such 
an  extent  as  to  render  the  importation  of  specie  to  any  con- 
siderable amount  profitable.  This  is  evident  from  the  fact, 
that  there  are  at  this  moment  but  small  sums  of  British 
coin  to  be  met  with  in  the  United  States,  which,  if  the  avails 
of  the  sales  of  the  public  stocks  now  owned  in  England 
had  been  received  here  in  money,  the  country  w^ould  have 
been  filled  with  British  coin. 

True,  the  payment  for  those  public  stocks  may  have  been 
made  in  money  ;  yet,  since  American  merchants  and  bank- 
ers were  indebted  in  England,  bills  of  exchange  upon  some 
American  merchant  at  New  York  or  New  Orleans,  was 
better  than  specie,  so  they  were  received  and  specie  was 
not  imported  into  America.  The  rate  of  exchange  always 
indicates  the  balance  of  trade  between  two  countries,  when 
not  interfered  with  by  banks  or  other  artificial  causes.  The 
free  exportation  of  specie  is  the  only  sure  check  upon  over- 
trading and  over-importing.  When  the  exchanges  are  at 
par,  bills  are  preferred  to  specie  ;  the  saving  in  each  remit- 
tance being  about  one  per  cent,  to  cover  insurance,  freight, 
cartage,  counting,  and  wear  and  tear  of  the  precious  met- 
als. But  where  a  remittance  is  to  be  made  in  the  coin  of 
one  country,  not  receivable  as  coin  in  the  other  country — > 
but  as  bullion — then  the  expense  of  coining  or  seigniorage, 
is  still  to  be  added  to  the  other  charges ;  making  the  expor- 
tation of  specie  so  much  more  expensive,  and  the  value  of 


■:w^. ,. -w^ 


DUNCOMBE*S  FREE  BANKING.  303 

a  bill  of  exchange  so  much  the  greater.  Thus  the  price  of 
bills  of  exchange,  like  the  barometer  of  the  weather,  indi- 
cates the  state  of  trade  between  two  countries.  The  ex- 
portation of  specie,  or  any  other  commodity,  will  be  resor- 
ted to  to  equalize  the  trade  between  the  two  countries  : 
this  is  the  situation  of  the  trade  between  the  United  States 
and  England  at  this  moment. 

American  coins  pass  as  bullion  in  England,  while  En- 
liah  coins  pass  in  the  United  States  at  or  above  their  par 
value  in  England.  The  sovereign  is  worth  a  shade  more 
by  law  in  the  United  States,  than  it  would  be  if  it  was  coin- 
ed into  American  gold  coin.  At  the  first,  appearance,  one 
is  led  to  consider  the  conduct  of  the  English  nation,  in  not 
receiving  American  coins  of  the  same  fineness  with  their 
own  as  coin,  but  only  as  bullion,  as  a  great  want  of  reci- 
procity ;  and  so  it  undoubtedly  is,  yet  the  effects  upon  the 
American  currency  and  American  commerce,  are  not  so  in- 
jurious as  it  at  first  appears  to  be. 

True,  when  the  rate  of  exchange  is  so  high  against  the 
Uuited  States  as  to  render  the  exportation  of  specie  neces- 
sary, the  American  merchant  has  to  pay  more  for  a  bill, 
that  is,  he  must  pay,  in  addition  to  the  ordinary  expense  of 
exporting  specie,  the  price  of  the  seigniorage  or  coinage,  of 
the  specie  that  must  be  sold  as  bullion. 

By  the  purchase  of  British  coin,  for  remittances  in  coin, 
the  saving  of  a  seigniorage  is  accomplished  when  British 
coin  is  to  be  bought  in  the  American  market ;  but  the  quan- 
tity of  British  coin  being  small  in  the  United  States,  the 
remitter  purchases  some  other  commodity,  as  cotton,  which, 
perhaps,  he  would  not  do  but  to  save  the  small  loss  in  a  re- 
mittance that  he  must  sustain  if  he  remits  American  coin. 
This  advances  the  price  of  cotton,  or  other  articles  of  ex- 
portation, a  shade  higher  than  it  would  otherwise    have 


304        duncombe's  free  banking. 

been.  So  this  seeming  want  of  courtesy  and  commercial 
or  financial  reciprocity,  on  the  part  of  the  English,  is  not 
so  injurious  to  American  prosperity  as  it  appears  to  be. 

It  is  not  material  where  the  exports  of  the  remitter  are 
directed  to  be  made,  for  the  payment  of  a  debt  in  France, 
England,  or  the  East  Indies,  or  West  Indies,  the  magic 
power  of  bills  of  exchange,  transfers  the  payer  and  receiver 
both  to  London — the  great  seat  and  centre  of  British,  Eu- 
ropean, Indian,  and  in  fact  of  American  commercial  ope- 
rations. The  London  Exchange  is  the  focus,  around  which 
the  business,  the  commerce,  the  wealth,  the  credit,  and  the 
exchanges  of  all  these  nations  and  countries  revolve  again 
and  again  until  they  find  their  level,  that  is,  their  proper  val- 
ue. The  exporters  and  importers  from  any  country  are 
not  uniformly  the  same  individuals.  If  they  were,  much  of 
the  necessities  for  bills  of  exchange  could  be  dispensed 
with  ;  because  the  exporter,  selling  his  goods  ,of  one  de- 
scription (as  of  cotton,)  to  the  house,  or  in  the  city  from 
which  his  outward  bound  cargo  was  to  be  taken,  he  could 
barter  the  one  commodity  for  another ;  as  is  often  the  case 
in  new  countries,  where  goods  are  bought  and  sold  for 
other  goods — cattle  are  exchanged  for  horses,  for  grain,  or 
for  merchandise,  called  "  store  pay," — and  for  the  balances 
notes  are  given,  to  be  paid  in  so  much  produce,  according 
to  the  market  price,  or  according  to  the  current  value  at 
such  future  period — or  notes  are  given  for  so  many  bushels 
of  wheat  of  such  and  such  a  quality,  to  be  delivered  at  such 
a  place,  without  any  mention  of  price,  or  with  a  proviso, 
that  if  the  said  note  is  not  paid  by  such  a  particular  time, 
that  the  same  shall  be  paid  in  so  much  money  at  some  day 
later ;  or  what  is  not  unfrequent  in  lumber  countries  or  in 
iron  manufacturing  countries,  where  the  principal  business 
of  the  place  is  the  producing  one  or  two  Staple  articles  of 


buncombe's  free  banking.  305 

exportation,  pot  and  pearl  ashes,  any  and  all  of  these  com- 
modities have  often  been  used  as  the  medium  of  exchange  ; 
and  the  owners  of  the  large  mills,  furnaces,  asheries  or  dis- 
tilleries, become  the  banks  of  deposite  to  the  people.  The 
man  who  has  lumber,  iron,  ashes,  or  whiskey,  atone  of  these 
establishments,  draws  on  the  proprietor  for  the  amount  he 
owes,  in  the  exchange  of  farms,  horses,  or  oxen,  or  for  the 
amount  of  his  bill,  for  whatever  he  may  have  bought  at  the 
store  ;  and  the  merchant  charges  such  price  for  his  goods 
as  makes  the  article  he  receives  equal  to  him  in  value  to 
money.  These  bills  are  received  and  accepted  by  the 
banker,  that  is,  the  manufacturer,  &c.  The  boards  are  not 
counted — the  iron  is  not  weighed — the  ashes  or  whiskey 
are  left  in  his  possession,  until  the  owner  chooses  to  remove 
or  transfer  them  to  some  other  purchaser.  Notes  are  of- 
ten given  for  trade  or  for  property,  and  no  particular  kind 
of  property  specified.  In  that  case,  the  drawer  of  the  note 
must  deliver  horses,  hogs,  cattle,  sheep,  lumber,  iron,  pot 
or  pearl  ashes,  whiskey  or  merchandise,  to  the  person  to 
whom  it  was  made  payable  at  the  time  it  was  due,  or  the 
value  would  be  expected  in  money.  At  times,  this  amount 
is  described  as  being  due  in  such  an  article  as  wheat  or 
whiskey,  at  the  price  it  will  command  at  the  time  in  some 
other  place,  where  there  are  uniformly  some  buyers  of  the 
article,  who  will  pay  the  money  for  the  article  ;  and  the  re- 
ceiver of  the  article  agrees  to  receive  it  at  the  residence  of 
the  man  who  pays  the  material,  either  in  the  expectation 
that  the  article  will  be  worth  as  much  there,  as  it  will  be  at 
the  place  named,  by  which  the  price  is  to  be  governed  :  or 
he  has  added  such  a  profit  on  his  article  of  sale  as  will  make 
his  receipts  equal  to  the  expense  of  transporting  the  com- 
modity to  be  received,  to  the  nearest  or  best  market. 

In  all  these  transactions,  some  of  the  leading  principles 


306  buncombe's  free  banking. 

that  govern  the  London  exchanges  are  prominent  features ; 
and,  although  from  the  bad  roads  arid  want  of  communica- 
tions with  other  parts  of  the  world,  there  is  but  little  for- 
eign trade  or  foreign  commerce  involved  in  the  transaction, 
yet  they  measure  their  property  in  dollars  and  cents,  or  in 
pounds,  shillings  and  pence,  of  a  sound  good  currency,  al- 
though their  medium  is  every  thing  but  money.  Whenev- 
er the  drawer  or  the  acceptor  of  a  bill  fails  to  pay  his  note 
bill  or  acceptance,  the  payee  recovers  in  money,  by  law,  a 
judgement  for  the  amount  of  the  note.  And  it  often  re- 
quires much  more  of  the  promised  material  to  meet  the 
payment  in  money,  than  it  would  have  required  had  it  been 
met  promptly  in  the  commodity.  This  seems  to  be  neces- 
sary, in  order  to  induce  punctuality  in  payments,  and  to 
compensate  the  creditor  for  the  delay  in  the  receipt  of  his 
property,  or  money,  as  it  has  now  become.  Where  no  sum 
has  been  mentioned  in  the  note  or  draft,  as  for  so  many 
bushels  of  good  merchantable  wheat,  or  so  liiany  hundred 
weight  of  black  salts,  or  pot  or  pearl  ashes,  the  jury  will 
give  judgement  against  the  defendant  for  so  many  dollars 
as  the  quantity  of  the  material  would  have  bee^  worth  at 
the  time  when  due,  and  at  the  place  mentioned. 


CHAPTER  XLIII. 

THE    BALANCE  OF  TRADE  AND  UNCURRENT  MONEY. 

The  balance  of  trade  between  two  countries,  as  was  be- 
fore observed,  is  the  balance  between  the  individual  mer- 
chants of  the  two  countries. 

When  the  balance  of  trade  is  occasioned  by  the  commer- 
cial transactions  of  the  individual  merchants  of  two  coun- 
tries, and  entries  have  been  made  of  the  imports  and  exports 


duncosibe's  free  banking.  SCyy 

in  the  Custom  Houses,  some  estimate  of  the  state  of  trade 
may  be  had  from  these  sources  ;  but  when  the  balance  of 
trade  has  been  created  by  the  sale  of  state  stocks  of  the  one 
country,  in  the  money  market  of  the  other  country,  the  bal- 
ance of  trade  is  estimated  from  the  rate  of  exchange,  and 
the  whole  value  of  exports  of  one  country,  including 
stocks,  specie,  and  merchandise,  is  compared  with  the  whole 
amount  of  like  imports.  And  hence,  although  the  state  of 
New  York  may  have  more  wisely  avoided  running  in  debt, 
or  have  borrowed  money  from  her  own  citizens,  or  from 
capitalists  in  the  United  States  ;  for,  even  although  it  costs 
her  even  a  shade  more  than  to  borrow  money  in  a  foreign 
country,  there  is  still  an  advantage  in  borrowing  money  in 
the  United  States,  for  in  making  remittances  to  a  foreign 
country,  when  the  balance  of  trade  is  uniformly  against  the 
country,  that  amount,  whether  great  or  small,  is  to  be  ad- 
ded to  the  remittance  by  the  remitter.  Yet,  when  the 
avenues  of  the  state  are  completely  surcharged  with  paper 
money,  and  the  specie  has  been  exported,  the  demand  for 
specie  will  be  just  as  great  from  the  state  of  New  York, 
and  from  the  banks  supplying  the  currency  to  that  state,  as 
it  is  from  the  states  that  have  sold  stocks  abroad,  and  have 
the  remittances  to  make.  Here  the  principle  of  the  equali- 
zation of  the  currency,  so  happily  illustrated  by  Adam 
Smith,  in  his  comparison  of  currency  with  water,  is  exem- 
plified. * 

The  demand  for  specie,  to  make  remittances  from  any 
one  part  of  the  country  is  extended  over  the  Union,  and  be- 
comes general ;  affecting  such  portions  most  as  have  most 
inflated  their  currency.  Hence,  if  the  whole  amount  of 
irredeemable  credit  paper  in  the  state  of  New  York,  was 
equal  to  the  whole  amount  of  credit  paper  issued  by  all  the 
banks  in  the  other  states  of  the  Union,  it  is  very  clear  that 


308  buncombe's  free  banking, 

the  money  pressure  in  the  state  of  New  York,  during  a 
panic,  would  be  far  greater  than  in  other  states  of  the  Un- 
ion. This  has  been,  unfortunately,  repeatedly  practically 
illustrated  during  the  last  few  years,  particularly  at  the 
south. 

The  following,  from  the  New  Orleans  Price  Current  of 
1840,  will  serve  to  illustrate  the  fact. 

RATES   OF  SPECIE,  BANK  NOTES,  (&c. 

Specie  -  -  -  -  5    to    6    per  cent.  prem. 

Alabama  State  Bank  and  Branches    -  3J  "     4^       "    discount. 

Tennessee  Banks        -  -  - 

Arkansas  Banks  -  -  - 

Pensacola^  Florida,      -  -  - 

Life  and  Trust,  Florida 

Planters',  Agricultural  and  Commercial, 

on  demand,  (fives) 
Do.         do.     branches,  on  demand     - 
Natchez  Rail-Road     -  -  - 

West  Felicana,  at  Woodville 
Bank  of  Port  Gibson,  (fives) 
Commercial  Bank  of  Manchester 

Do.  do.        Rodney 

Union  Bank  of  Mississippi     - 
Commercial  Bank  of  Columbus 
Grand  Gulf  Rail-Road  Go.     - 
Lake  Washington  and  Dover  Creek 
Com.  and  Rail-Road  Bank,  Vicksburg 

POST  NOTES. 

Commercial,  Agricultural  and  Planter's, 
12  months,  spring  of  1839,  bearing  in- 
terest,         -            -            -            -  30  **  40  ««  <* 
Union  Bank  of  Mississippi,  bearing  in- 
terest,           -            -            -            -  55  "  60  "  " 
Woodville,  Manchester  and  Port  Gibson  30  **  40  **    »    ** 
Rodney            -            -            -            -  35  "  45  "  " 
Natchez  Rail-Road    -             -            -  75  "  80  "  *' 
Com.  and  Rail- Road  Bank,  Vicksburg  60  "70  **  *« 
Water  Works  Bank                  do-  60  "  70  **  <« 
Bank  of  Vicksburg    -             -             -  60  "  70  *'  ** 
Citizens' Bank  of  Madison  County  §0  <<  85  "  " 
Tombigbee  Rail-Road  Co.      -            -  78  "84  "  " 
Brandon  Bank            -            -            -  93  •<  95  *<  " 

And  this  is  the  currency  for  the  south  !  We  will  hereaf- 
ter see  what  the  currency  of  the  North  West  is  :  see  "  cur- 
rency of  Michigan." 


5 

to  6 

n 

t   "  4^ 

4 

*'  6 

30 

"  35 

20 

"  25 

20 

"  25 

5 

"  10 

10 

"  20 

75 

*'  80 

16 

''  20 

10 

"  15 

10 

"  15 

35 

"  45 

55 

*'  60 

30 

*'  40 

50 

**  55 

55 

"  60 

55 

"  60 

t)t)NCOMBE  S  FREE  BANKING.  30D 

This  is  truly  a  beautiful  comment  upon  the  j^alatable  doc- 
trine, that  credit  bank  paper  is  money  :  that  incorporated 
banks  enrich  a  country — that  they  add  to  the  capital  of  a 
country — and  that  any  thing  that  will  pass  as  money,  is 
equal  to  money,  and  is  money  ! 

Now  let  me  ask,  what  principle  is  there  in  the  New 
York  General  Banking  law,  that  will  prevent  like  results, 
from  similar  management  of  their  banks  1  Is  there  less 
private  interest  ? — is  there  less  credit  ?  Private  interest  may 
be  less  directly  temporarily  exercised,  but  it  is  not  the  less 
powerful  in  its  operation.  And  credit  is  extendedy  rather 
than  being  lessened  ;  yet,  the  apparently  better  security  of 
the  bill-holder  may,  by  the  increased  liabilities  of  the  com- 
pany in  the  deposites  with  the  Comptroller,  more  than  bal- 
ance this  evil :  time  alone  can  tell ;  to  me  it  appears  doubtful. 

Next  let  me  ask,  what  has  caused  the  depreciation  of  the 
currency  at  the  south  and  west  ?  Whatever  the  cause  may 
have  been,  their  returns  to  their  respective  legislatures 
show  a  previously  inflated  currency,  and  an  intimate  de- 
pendance  upon  credit ^  under  the  direction  o£ private  interest. 
Their  discounts  had  been  liberal ;  had  been  made  upon  va- 
rious evidences  of  debt  instead  of  confining  their  discounts 
to  the  specie  actually  in  their  vaults  at  the  time  of  their  dis_ 
counts.  If  "  like  causes  produce  like  effects,"  although 
the  pressure  upon  the  money  market  in  the  state  of  New 
York,  under  the  General  Banking  law,  may  be  longer  de- 
layed, partly  from  the  counterbalancing  influences  of  the 
safety  fund  banks,  and  partly  from  the  increased  credit  that 
these  bills  will  be  likely  to  enjoy  at  home,  from  a  belief  that 
the  bill-holder  is  better  secured  than  chartered  banks  se- 
cure their  bill-holders,  they  having  the  properties  of  so 
many  individuals  pledged  for  their  redemption.  Besides, 
their  personal  exertions  to  favor  each  other,  to  collect  safe- 
a2 


310 

ty  fund  notes,  to  raise  specie  for  their  own  private  uses,  or 
for  exportation,  may  give  the  banks  established  under  the 
General  Banking  law  important  advantages,  while  it  will 
very  materially  lessen  the  safety  of  the  "  safety  fund " 
banks,  or  lessen  their  discounts,  and,  consequently,  their 
dividends. 

The  safety  fund  banks  can  have  but  little  support  from 
each  other,  in  giving  a  preference  to  their  own  bills  over 
the  bills  of  the  banks  established  under  the  General  Bank- 
ing law,  because  as  self-interest  is  the  motive  imwer,  the 
banks  under  the  General  Banking  Law  have,  to  a  certain 
extent,  one  common  interest — one  bond  of  union — that  of 
extended  credit,  and  like  persons  living  in  *'  glass  hou- 
ses," they  are  each  of  them  unwilling  to  commence 
throwing  stones  at  the  other.  They  even  would,  if  occa- 
sion should  require,  aid  each  other,  and  collect  the  safety 
fund  bank  notes  to  supply  their  demands  for  specie,  while 
the  safety  fund  banks,  from  their  limited  responsibility, 
have  less  to  loose.  Besides,  the  stockholders  of  incor- 
porated companies  have  generally  been  able  to  secure 
themselves  in,  and  by  their  business  of  banking,  whether 
their  notes  were  at  par,  or  very  far  below  par.  Hence, 
one  real  advantage  of  the  banks  of  the  General  Banking 
Law  is,  private  responsibility  and  the  vigilance  of  direct 
interest  to  sharpen  their  attention  to  their  business.  From 
all  these  causes  they  may  be  able  to  do  business  longer, 
with  the  same  amount  of  specie  in  their  vaults,  than  the  in- 
corporated banks  could.  But,  since  the  amount  of  specie 
required  to  be  kept  in  their  vaults  is  less,  (and  few  banks 
for  any  length  of  time  keep  more  specie  on  hand  than  the 
law  requires  them  to,  unless  they  have  some  direct  inter- 
est in  so  doing,)  their  issues  are  more  dependant  upon 
credit  than  the  issues  of  incorporated  banks. 


duncombe's  free  banking.  311 

The  banks  under  the  General  Banking  Law,  may  issue 
eight  times  the  amount  of  paper  that  they  are  required  to 
have  of  specie  in  their  vaults.  But  to  make  a  paper  dol- 
lar, having  but  one  eighth  part  of  its  value  in  money  in  de- 
posite — the  remaining  deposite  being  credit — pass  current 
for  any  length  of  time,  would  be  like  making  bogus  money 
of  twelve  and  a  half  per  cent,  of  one  of  the  precious  met- 
als and  seven  parts  alloy,  pass  current  as  standard  gold  or 
silver  coin  :  it  would  only  pass  so  long  as  the  public  stock 
of  gullibility  lasted.  This  base  coin  might  serve  the  pub- 
lic as  well  as  credit  paper  money  ;  but  take  the  spurious 
coin  to  an  assay er,  and  it  vanishes  into  smoke.  So  attempt 
to  make  foreign  remittances  in  credit  bank  paper,  and  it 
evaporates  like  the  base  coin  in  the  chaldix)n  of  the  assayer  i 
the  chemical  touch  of  the  foreign  specie  exporter  melts  it 
to  dross,  and  every  body  wonders  how  that  could  not  have 
been  foreseen. 

True,  the  securities  pledged  with  the  Comptroller  of 
state  may  ultimately  redeem  the  notes.  But  this  could  not 
be  done  under  a  suspension  of  specie  payments  by  the 
banks,  as  there  could  be  no  buyers ;  nor  until  some  favora- 
ble state  of  the  money  market  enabled  the  Comptroller  to 
sell  debts  and  lands,  the  only  security  deposited  with  him 
for  the  redemption  of  the  bills,  could  they  be  redeemed. 
But,  supposing  the  securities  could  be  sold,  and  the  money 
be  raised  to  redeem  the  bills  at  any  time,  and  that  the  insti- 
tutions, one  after  anotlier,  could  be  wound  up,  as  some  of 
them  already  have  been,  without  loss  to  the  bill-holder,  the 
effects  of  the  previous  enormous  expansions,  owing  to  the 
evils  of  a  credit  currency,  regulated  by  private  interest, 
would  be  precisely  the  same.  True,  the  bill-holder  would 
not  be  the  only  loosers  ;  yet,  the  whole  business  of  the 
country  would  be  checked,  and  the  contraction  of  the  cur- 


312  buncombe's  free  banking- 

rency  (the  certain  consequence  of  previous  expansion,) 
would  lessen  prices,  retard  improvements,  throw  thousands 
out  of  employment,  and  produce  all  the  afflicting  scenes 
that  uniformly  accompany  collections  and  sales  made  by  the 
sheriifs.  It  is  probable,  that  the  sales  of  bonds  and  lands 
by  the  Comptroller,  might  not  proceed  farther  than  would 
satisfy  the  actual  demands  for  specie  for  remittances 
abroad,  yet  this  would  not  afford  any  relief  to  the  domes- 
tic business  of  the  country.  The  other  institutions  would 
find  the  price  of  specie  too  high  for  them  to  purchase  it, 
and  attempt  to  extend  their  business  upon  the  purchase. 
The  rate  of  exchange  would  be  too  high  for  the  purchase 
of  bills  to  meet  the  den>and  for  specie  for  remittances ; 
and  the  only  remedy  for  these  credit  paper-machines  would 
be  to  contract  their  circulation,  and  thus  relieve  themselves 
from  the  universal  pressure  with  which  they  are  surroun- 
ded. Perhaps  the  first  defaulters  would  be  the  only  insti- 
tutions forcibly  disposed  of  at  a  sacrifice ;  for,  it  might 
happen  for  once,  that  men  might  learn  wisdom  from  the 
past.  But  the  pressure  of  the  times  would  be  severe  in- 
deed, when  the  banks  shall  actually ^e^eZ  t.he  pressure.  The 
expansions  of  the  currency,  and  its  fluctuations,  are  the 
great  causes  of  complaint  against  credit  paper  being  al- 
lowed to  pass  and  circulate  as  money.  The  losses  by  bill- 
holders  are  to  be  avoided  when  that  is  possible  ;  but  I  fear 
that  the  revulsion  in  business,  and  trade  of  the  state  of 
New  York,  produced  by  such  a  paper  currency  as  shall 
substitute  credit  for  capital,  and  securities  for  money,  will 
be  quite  as  great  an  injury  to  the  state  of  New  York,  and 
last  longer  in  that  state,  than  the  ruinous  expansions  of  the 
currency  of  the  state  of  Michigan  by  their  "  safety  fund," 
**  real  estate  pledged,"  and  "  private  property  holden'* 
*'wlld  cat"  bank  system  has  been  to  them.     The  shock  wiU 


duncombe's  free  banking.  313 

not  be  so  sudden,  nor  violent,  perhaps,  in  the  state  of  New 
York,  as  it  was  in  Michigan ;  but,  if  the  currency  is  infla- 
ted upon  credit  to  the  same  extent  as  it  was  in  Michigan,  the 
same  discredit,  fluctuation,  depreciation,  and  contraction  of 
the  currency  must  follow  :  and  it  is  yet  to  be  seen  whether 
the  derangement  of  business,  occasioned  by  an  expansion 
of  the  currency  is  overcome,  and  the  conjmunity  enabled 
to  commence  a  healthy  business  sooner,  where  the  business 
passes  through  several  changes  before  it  is  ultimately  with- 
drawn from  the  public,  or  where  it  fails  at  once,  and  the 
bill-holders  suffer  the  loss  direct.  They  are  both  of  them 
loosing,  gambling  speculations  to  the  public,  and  ought  to 
be  discountenanced  by  every  honest  man. 

No  farro  bank,  wheel  of  fortune,  or  roulette,  is  more 
certain  to  loose,  or  show  a  more  plausible  face,  or  greater 
probability  to  win,  than  does  credit  bank  paper,  when  au- 
thorised to  circulate  as  money. 

Lotteries  are  now  very  generally  wisely  prohibited 
throughout  the  northern  states  of  the  Union ;  but  when 
will  the  great  and  grand  lottery  of  incorporated  bank  cred- 
it, with  limited  responsibility,  in  chartered  hank  paper,  be 
dealt  with  after  the  same  manner  ?  Gambling  vitiates  the 
morals,  destroys  the  mental  and  physical  faculties,  enervates 
the  constitution,  lessens  the  love  of  virtue,  and  of  correct 
moral  principles,  and  establishes  artificial  and  desperate  no- 
tions of  honor,  not  founded  in  the  moral  law,  but  inconsis- 
tent with  the  doctrines  of  divine  inspiration  and  revelation. 

Virtue  and  intelligence  are  as  indispensable  to  the  peace, 
prosperity,  perpetuity,  and  good  government  of  a  repub- 
lic, as  fire  and  water  are  to  domestic  comfort. 

The  moral  education  of  the  whole  people  of  these  Uni- 
ted States,  is  not  only  wisely,  but  indispensably  necessarily 

encouraged  by  every  legislature  in  the  Union. 
a2* 


314  buncombe's  feee  banking?. 

Temperance  societies,  througli  the  blessing  of  heavenv 
have  checked,  in  a  great  measure,  the  fatal  career  in  which 
the  American  public  were  madly  wildly  driving  to  de- 
struction. Although  intemperance  be  not  entirely  removed 
from  the  whole  land,  yet  it  ha&  the  mark  of  infamy  and  the 
stain  of  disgrace  upon  it  in  every  form  ;  and  in  every  shape 
in  which  it  makes  its  appearance,  whether  it  be  seen  in  the 
palaces  of  the  rich,  or  in  the  hovels  of  the  poor,  at  the  pri- 
vate dinner  or  at  the  public  festival  of  our  national  jubilee, 
the  finger  of  scorn  is  pointed  openly,  honorably  and  pub- 
licly at  it;  and  when  thought  shall  have  been  tortured  to 
find  an  epithet  opprobrious  enough  to  blast  it  with  a  breath, 
it  will  call  it  intemperance. 

Vice  will  sooner  hide  its  frightful  head  from  shame  than  for 
legal  enactments.  Public  sentiment  should  be  directed  to 
the  pursuit  of  virtue  and  morality.  Legislatures  should 
carefully  avoid  encouraging  an  immoral  spirit,  by  authori- 
sing an  immoral  practice.  Far  more  can  be  done  by  remo- 
ving the  temptation  to  vice,  than  by  penal  enactments  and 
severe  punishments  for  crimes  committed.  In  this  opinion, 
I  am  supported  by  the  history  of  the  temperance  reform  ; 
which  proceeded  with  more  uniform  success,  and  accom- 
plished more  salutary  and  permanent  benefits,  under  the 
mild  guidance  o{  female  precept  and  exam'ple,  than  when 
legislatures  have  attempted  to  force  this  good  upon  the  pub- 
lic, nolens  volens. 

Thus  with  regard  to  the  circulating  medium  ;  I  am  more 
desirous  to  show  the  proposed  plan  to  the  public,  than  to 
compel  them  to  adopt  it.  Reforms  should  always  com* 
mence  in  the  domestic  circle,  and  proceed  from  thence  to 
every  channel  of  commerce,  and  every  avenue  of  society. 
I  would  not  attempt  to  reform  by  a  rigid  legislation,  that 
should  forcibly  drive  all  credit  paper  from  the  business  of 


CrNCOMBE's  FREE  BANKING.  315 

tlie  country  at  once.  That  would  be  unjust,  if  not  imprac- 
ticable. Nor  would  I  interfere  with  vested  rights,  or  med- 
dle with  existing  bank  charters.  But  I  would  offer  to 
capitalists  a  better  investment  than  private  bank  charters  or 
public  debts  would  furnish  ;  freer  from  anxiety  and  care, 
more  readily  convertible  into  specie  at  a  moment's  notice, 
and  more  permanently  secure  in  the  regularity  of  its  divi- 
dends, than  other  American  investments. 

It  is  true,  the  plan  I  propose  precludes  the  stockholders 
from  that  immense,  improper,  and  powerful  influence  they 
exercise  in  society,  in  the  credit  they  possess  in  the  legal 
privilege  and  right  to  issue,  lend,  and  circulate  bank  paper. 

To  those  who  desire  an  usurious,  unjust  profit  for  the  use 
of  their  money,  my  system  of  currency  will  be  any  thing 
but  palatable.  I  am  ready  to  meet  their  demurrers,  and 
plead  to  them  specially.  But  to  convince  them  may  be  a 
very  different  thing ;  for,  '*  convince  a  man  against  his  will, 
a  nd  he  is  of  the  same  mind  still."  But  the  honest  money- 
lender, who  is  desirous  to  receive  only  the  highest  fair  rate 
of  interest,  in  the  form  of  dividends,  that  can  be  safely  and 
honorable  made,  will  see  that  this  system  possesses  and 
offers  numerous  decided  advantages  to  the  money-lender ; 
in  the  lessened  expense  of  the  business  of  banking,  and  in 
the  increased  amount  of  the  dividends — in  their  being  more 
uniform,  more  permanent,  and  safer  than  any  other  funds 
or  stocks  in  America. 

The  expense  of  conducting  an  institution  of  this  sort, 
with  five  millions  of  dollars  to  lend,  where  the  smallest 
notes  used  were  not  less  than  the  smallest  Bank  of  Eng- 
land notes  used  in  England,  might  not  be  more,  perhaps 
not  as  much,  as  the  expenses  usually  attendant  upon  the 
conduct  of  a  chartered  bank  with  a  capital  of  one  hundrecj 
thousand  dollars. 


316  duncombe's  free  banking. 

The  sole  business  of  the  local  banks  being  that  of  banks 
of  discount,  simply  discounting  only  safe  actual  business 
paper,  having  but  a  short  time  to  run,  and  collecting  the 
xiiscounted  notes.  The  other  complex  and  incompatible 
duties  of  the  chartered  banks,  being  conducted  by  the  di- 
rectors of  the  United  States  and  states  banks  of  issue. 

These  facts  will  hardly  be  doubted  by  any  one  at  all  fa- 
jniliar  with  the  ordinary  business  of  our  chartered  banks. 

They  will  admit  the  following  facts  in  favor  of  this  free 
system  of  banking.  That  it  will  be  more  permanent,  and 
that  its  paper  will  enjoy  a  much  more  extended  circulation. 
It  will  be  safer,  because  the  failure  of  one  local  bank  (which 
can  hardly  by  possibility  happen  if  the  directors  have  giv- 
en good  security,  and  if  the  state  officers  do  their  duties 
faithfully  as  supervisors,)  cannot  effect  the  stability  of  the 
whole  institution ;  besides,  a  safety  fund  should  be  provi- 
ded from  the  bonuses  or  profits  of  the  stockholders,  to  meet 
any  casualty  or  defalcation  of  any  bank  of  discount. 

The  currency  of  the  country  ought  never  to  be  subject- 
ed to  the  direction  of  private  interest,  or  left  for  its  stabili- 
ty' to  the  chances  of  commercial  transactions,  political  party 
policy  or  passions,  or  to  the  management  of  interested 
speculators,  who  give  no  further  security  for  the  soundness 
or  convertibility  of  the  currency,  than  just  as  far  as  the  con- 
tinuance of  the  business  makes  it  their  interest  to  pay  or 
withhold  their  sj^ecie,  or  as  their  own  use  of  it  renders  it 
convenient  or  profitable  to  themselves. 

I  know,  that  at  this  time  to  compare  any  system  of  bank- 
ing to  the  **  wild  cat"  banks  of  Michigan,  is  to  endanger 
one's  character  for  simiiliesj  and  more  especially,  when  the 
comparison  is  made  between  the  "  \yild  cat"  banks  and  the 
most  popular  system  of  banking  that  has  *of  late  years  made 
its  appearance, — and,  in  fact,  a  system  that  does  possess 


buncombe's  free  banking.  317 

lessened  evils  and  increased  advantages  over  chartered 
banks  in  several  respects,  if  these  advantages  are  not  found 
to  be  counterbalanced  by  the  increased  credit  that  is  incor- 
porated in  the  very  essence  of  the  system,  and, consequent- 
ly, containing  a  dangerous  power  of  expansion.  Yet,  I 
am  inclined  to  believe,  that  the  defects  and  failures  of  the 
late  safety  fund  banks  of  Michigan,  was  not  so  much  an  er- 
ror in  the  system  of  credit  upon  which  they  were  based,  as 
upon  the  credit  itself;  and  I  fear  that  there  will  be  found 
nearly  the  same  tendency  to  expansion,  to  depreciation,  and 
consequent  contraction,  in  the  currency  issued  under  the  N. 
York  General  Banking  law,  that  so  rapidly  overturned  the 

Michigan  banks. 

In  Michigan,  a  mania  for  banking  prevailed  throughout 

the  community,  The  facility  for  gratifying  that  propensi- 
ty was  afforded  by  their  general  banking  law.  They  in- 
dulged to  their  entire  satisfaction  and  conviction  tliat  credit 
is  not  capital,  and  that  paper  is  not  money.  The  shock  was 
severe,  and  much  money  was  lost  to  the  state,  as  well  as  to 
private  individuals,  by  this  speculation.  But  the  buoyancy 
of  spirit,  industry  and  economy  of  its  inhabitants,  will  ena- 
ble them  to  recover  their  former  flourishing  condition  and 
prosperity,  and,  perhaps,  to  profit  by  their  past  experience; 
and  a  few  years  hence  the  currency  of  Michigan  may  be  as 
sound  as  the  currency  of  any  other  state  of  the  Union. 

Ohio  is  now  laboring  under  a  severe  pressure  from  cred- 
it paper,  and  diminished  specie  for  circulation.  The  south- 
ern states  are  no  better  situated  respecting  their  currency. 
And  from  former  statements,  I  fear  that  brokers,  bankers, 
and  stock-jobbers,  will  make  more  money  by  the  western 
banks,  than  all  the  merchants,  farmers  and  mechanics  col- 
lectively. Instead  of  the  banks  having  benefitted  mechan- 
ics and  laborers,  mechanics  and  laborers  may  often  traCQ 
their  ruin  to  the  influence  of  the  banks. 


318  duncombe's  free  banking. 

Banks  liave  an  appearance  of  aiding  enterprise,  and  of 
promoting  industry.  But  this,  too,  is  a  fallacy.  They  are, 
in  fact,  a  check  to  industry,  and  destroy  public  confidence. 
They  encourage  a  spirit  of  legal  gamblings  bribery  and  cor- 
ruption, to  induce  legislatures  to  favor  private  interest  at 
the  public  expense.  In  fact,  legislatures  should  never  in- 
terfere with  the  currency. 

Legislators,  in  the  incorporation  of  banking  companies, 
have  often  appeared  to  have  had  more  the  interest  of  the 
banking  company  in  view%  than  the  public  good  ;  and  hence 
the  evil  effects  of  partial  and  local  legislation  upon  subjects 
of  general  interest  and  importance. 

But  the  New  York  General  Banking  law  evinces  a  more 
extended  and  enlightened  legislation ;  for,  while  it  amply 
provides  for  the  profit,  interest,  and  advantages  of  the  asso- 
ciations intended  to  be  formed,  it  takes  special  care  to  secure 
the  bill-holder  by  deposites  pledged  with  the  Comptroller 
of  state.  Yet,  as  far  preferable  as  this  system  of  banking 
may  appear  to  be  (on  account  of  the  better  security  of  the 
bill-holder,)  than  the  present  system  of  chartered  banks,  I 
am  apprehensive  this  system,  too,  has  its  incurable  defects. 

Credit  cannot  he  used  as  capital  for  any  length  of  time. 
And,  although  the  bill-holders  may  feel  themselves  secure, 
receive  the  notes,  and  even  lay  them  by  them  as  they  would 
receive  and  lay  up  specie  ;  yet,  the  continuance,  for  any 
length  of  time,  of  an  inflated  currency,  must  advance  pri- 
ces and  increase  foreign  importations,  which,  being  often 
purchased  upon  credit  in  a  foreign  market,  must  be  met  and 
promptly  paid  in  specie,  bills,  drafts,  or  other  remittances. 
Besides,  the  expansions  of  the  currency  induces  habits  of 
indolence  and  extravagance.  The  temporary  rise  of  pri- 
ces lessens  the  exertions  of  all  classes  of  producers  ;  while 
the  consumptions  are  increased  instead  of  being  lessened. 


buncombe's  free  banking.  319 

The  balance  of  trade  will  continue  to  increase  against 
the  country,  the  rate  of  exchange  will  also  increase,  the 
expense  of  remittances  will  increase,  and  the  exportation 
of  specie  must  follow  as  a  matter  of  course. 

The  natural  tendency  of  credit  to  expand,  and  the  facili- 
ty with  which  bills  may  be  obtained  for  circulation  under 
the  New  York  General  Banking  law,  will  be  liable  to  in- 
flate the  currency  beyond  measure,  and  increase  importa- 
tions ;  this  will  be  positively  followed  by  the  exportation  of 
specie  and  a  drain  of  the  banks. 

The  payment  of  the  annually  accruing  interest  upon  the 
enormous  loans  already  made,  can  only  be  met  by  direct 
taxation,  or  a  resort  to  additional  loans.  In  this  state  of  our 
accounts  with  European  nations,  or  with  England  alone, 
domestic  afflictions  will  exceed  any  thing  that  has  ever  be- 
fore been  witnessed  in  America.  Formerly,  the  wealthy, 
the  bankers,  the  importing  merchants,  and  the  speculators, 
were  the  persons  who  really  suffered  most  from  contrac- 
tions ;  but  when  a  contraction  of  the  currency  under  the 
General  Banking  law  takes  place,  the  lengthened  credit 
which  their  bills  have  had,  their  having  involved  securities 
upon  which  minors,  orphans,  lunatics,  and  insane  persons 
could  have  been  supported ;  and  also  the  mortgages  of 
lands  in  which  two  families  have  an  interest,  and  upon  which 
perhaps  both  of  these  families,  with  their  respective  de- 
pendants, relied  solely  for  their  support ;  these  bonds,  and 
these  farms,  must  be  sold,  and  at  an  enormous  sacrifice,  if 
the  bill-holder  is  to  be  saved  harmless.  But  alas,  for  him  ! 
when  there  has  been  more  consumed  in  the  community 
than  has  been  produced,  public  works  are  necessarily  de- 
layed or  suspended  for  want  of  capital.  From  the  day  la- 
borer to  the  highest  officer  of  state,  one  general  ruin  awaits 
them.     For  when  credit  has  been  too  long,  and  too  freely 


520  dtjncombe's  free  banking. 

employed  as  capital^  there  must  come  sooner  or  later  a  pay- 
day ;  and  tlie  longer  the  payment  is  deferred,  the  greater 
will  be  the  amount  to  be  paid,  and  the  more  extended  the 
ruin  necessary  to  meet  the  payment.  The  sacrifice  must 
be  greatest,  where  the  urgency  is  greatest,  and  the  means 
to  accomplish  it  the  most  disproportionate.  But  the  rules 
which  regulate  currency,  are  as  immutably  established 
"  as  the  laws  of  the  Medes  and  Persians,  which  alter eth 
not." 

But  how  defective  and  imperfect  will  be  found  the  se- 
curities that  will  not  sell  for  the  money  that  they  have  been 
pledged  to  secure.  The  Comptroller  may  rigidly  adhere 
to  the- law  ;  offer  for  sals,  and  perhaps  sell  at  a  great  sacri- 
fice, lands  and  public  bonds.  But  here  is  the  secret:  when 
the  securities,  from  the  extreme  pressure  of  the  times,  can- 
not be  made  available  to  half  the  amount  of  bills  in  circu- 
lation, the  legislature  must  again  intervene,  and  these  banks 
must  have  relief  afforded  them  by  law.  The  bill-holders, 
finding  they  are  not  secure  if  they  press  the  sales  of  their 
securities  at  a  sacrifice — and  the  ruin  becomes  general. 
The  sacrifice  necessary  to  be  made  by  the  most  prudent  oi 
these  institutions,  would  only  allay,  not  cure  the  complaint. 
This  sacrifice  by  so  many,  and  by  such  influential  and  res- 
pectable persons,  cannot  be?  expected  to  be  made  even  by 
those  unconnected  with,  and  hostile  to  these  institutions. 
The  influence  of  the  bankers  and  fund-holders  may  be  suf- 
ficient to  procure  the  passage  of  a  law,  shewing  them  as 
great  lenity  and  indulgence  as  has  heretofore  been  extend- 
ed to  incorporated  banks,  under  far  less  urgent  occasions 
and  circumstances.  What  has  once  been  done  may  be  done 
again ;  and,  after  having  been  frequently  repeated,  it  be- 
comes a  matter  of  right,  which  it  would  be  the  highest  in- 
justice to  refuse  :  and  this  will  be  the  natural  course,  and 


321 

tlie  probable  history  of  the  currency  produced  by  the  Gen- 
eral Banking  law.  We  may  have  a  credit  inconvertible 
currency  for  years,  perhaps,  before  one  dollar  out  of  the 
eight  that  circulates  will  be  specie.  True,  if  an  inconver- 
tible paper  must  be  used  by  the  public  in  lieu  of  money, 
this  may  as  well  be  used  as  any  other ;  and  the  General 
Banking  law  may  be  so  amended  as  to  give  perfect  securi- 
ty to  the  bill-holders.  Perhaps  time  would  secure  the  bill- 
holder  under  the  present  law ;  but  not  until  after  a  suffi- 
cient length  of  time  shall  have  elapsed  for  the  whole 
country  to  emerge  from  the  chaos  and  ruin  of  t  he  shock 
of  suspensions  and  contractions.  But  every  shock  the 
currency  receives,  and  every  expansion  and  contraction  of 
the  currency,  retards  the  healthy  growth  and  prosperity  of 
the  country — weakens  the  government,  by  lessening  public 
confidence  in  republican  institutions,  and  gives  the  ene- 
mies of  democracy  new  cause  of  triumph  and  rejoicing. 

The  bonds  of  the  free  and  independent  states  of  this 
Union,  will  be  hawked  about  the  market  of  our  rivals,  as 
valueless  as  the  notes  or  bonds  of  any  insolvent  debtor ; 
and  to  increase  their  value  in  a  foreign  market,  the  General 
Government  will  be  required  to  endorse  for  the  several  in- 
solvent states.  A  majority  of  the  states  being  involved  in 
debt,  will  agree  to  give  this  additional  security  to  our  for- 
eign creditors  in  order  to  delay  the  payment  of  the  interest 
for  a  short  period,  or  to  obtain  additional  loans,  out  of  which 
to  meet  the  interest.  And  thus  we  will  have  once 
more  commenced  a  national  debt,  which,  when  once  estab- 
lished upon  such  broad  principles,  and  for  such  universal, 
yet  local  purposes,  of  internal  improvement,  will  be  likely 
to  be  continued. 

The  General  Government,  once  involved  for  the  amount 

already  expended,  the  completion  of  these  works  will  be 
b2 


322  duncombe's  free  banking. 

strenuously  urged ;  and  policy  will  be  thought  to  dictate 
that  they  should  be  completed.  New  loans  must  be  made 
to  effect  this  object.  And  the  same  majority  that  would 
pledge  the  revenues  of  the  general  government  in  a  foreign 
market,  for  the  debts  of  the  different  states,  will  extend 
their  credit  to  complete  the  works  that  have  been  thus  be- 
gun ;  and  with  much  mor6  plausibility  than  before  :  as,  by 
completing  them,  they  may,  perhaps,  pay  something  more 
than  sufficient  to  keep  them  in  repair,  and  thus  save  at  least 
part  of  the  money  thus  invested.  Hence,  a  foreign  nation- 
al debt,  the  worst  of  all  public  or  national  debts,  will  pro- 
gress, until  the  General  Government  will  be  obliged  to 
have  recouse  to  direct  taxation  (for  local  purposes,)  to  meet 
the  annually  accruing  interests  on  public  bonds.  Or  what 
is  even  worse  than  taxation,  they  must  submit  to  pursue 
such  a  commercial  policy  towards  England,  as  her  Majes- 
ty's Ministers  may  dictate,  and  her  credit  system  require. 
And  all  these  evils  are  the  natural  effects  of  the  connec- 
tion of  currency  with  credit,  with  politics,  and  with  private 
interest. 

Credit  should  never  be  allowed  to  usurp  the  place,  exe- 
cute the  office,  or  perform  the  functions  of  real  capital,  as  a 
basis  for  the  issue  of  paper  to  circulate  as  money.  Its 
natural  tendency  and  power  of  expansion,  will  fill  all  the 
channels  of  business  and  commerce  ;  which,  v/hen  once 
filled,  flow  into  foreign  channels  as  instantly  as  they  are 
surcharged.  And  here,  since  only  the  precious  metals  are  the 
exportable  materials,  every  dollar  exported  lessens  the 
circulation  eight  dollars  !  Do  not  stare — it  lessens  the  posi- 
tive power  of  circulation  in  that  proportion.  But  that  is 
not  all ;  the  panic  induces  many,  who  before  had  kept  these 
bills  by  them  and  felt  quite  secure,  to  exchange  them  for 
specie.     Here^he  effect  is  the  same  as  before.     Every  one 


buncombe's  free  banking.  323 

hundred  dollars  thus  drawn  from  the  banks,  lessens  their 
power  of  circulation  eight  hundred  dollars  ;  specie  is  re- 
quired, by  the  high  price  of  bills  of  exchange,  for  expor- 
tation, and  the  banks  must  be  again  and  again  brought  back 
to  their  first  starting  point. 

From  the  returns  made  to  the  legislature  of  the  state  of 
New  York,  it  appears  that,  while  the  safety  fund  ^banks 
have  wisely  contracted  their  discounts  and  lessened  their  cir- 
culation, the  banks  under  the  General  Banking  law  have  ex- 
panded to  more  than  enough  to  supply  their  place.  The  high 
rate  of  exchange,  and  the  demand  for  remittances,  should 
forewarn  every  banker  and  every  large  dealer,  of  the  danger 
of  extending  credit  under  the  present  indebtedness  of  so 
many  of  the  states. 

One  of  the  most  valuable  features  of  the  New  York 
General  Banking  law  is,  the  separation  of  the  power  of  is- 
suing bills  from  the  power  of  discounting  notes,  and  of 
putting  them  into  circulation.  Besides,  the  delay  ne- 
cessary to  the  issuing  of  notes,  gives  the  depositors  of  real 
property  time  for  reflection  and  consideration,  and  even 
for  present  emergencies  to  subside,  before  they  hypothe- 
cate their  debts  or  lands  for  bank  paper ;  which  time  will 
prove  is  not  money,  nor  wealth,  and  only  the  representa- 
tive of  either,  while  it  is  convertible  at  sight — ^beyond  this 
all  is  fallacy  and  delusion. 

"  Knowledge  is  power" — ^but  few  reflect  upon  the  im- 
portance of  a  correct  knowledge  of  currency,  of  finance, 
of  banking,  and  of  exchanges.  We  grope  on  in  the  dark, — 
find  no  instruction  in  the  past.  We  treat  the  subject  of  finance, 
as  one  of  chance,  of  expediency,  of  circumstance,  and  of 
fluctuations  ;  while  we  neglect  the  enquiry  into  its  elemen- 
tary principles  and  into  the  laws  by  which  it  is  governed. 
Instead  of  commencing  our  investigations,  by  thoroughly 


324  buncombe's  free  banking. 

comprehending  the  first  principles  into  which  every  ques- 
tion of  currency  resolves  itself,  we  direct  our  attention  to 
the  easiest  and  most  rapid  means  of  acquiring  something 
that  will  circulate  for  a  time  as  money,  or,  when  one  cred- 
it system  has  exploded,  to  the  creation  of  a  new  one  that 
will  explode  as  certainly,  sooner  or  later,  as  the  preceding 
system  has  done. 

OP  THE  IMPORTANCE  OF  A  KNOWLEDGE  OF    CURRENCY   TO 
LEGISLATURES. 

A  knowledge  of  the  workings  of  the  machinery  of  an 
ordinary  chartered  bank,  with  all  its  fiscal  agents  and  leger- 
demain, constitutes  but  a  very  superficial  knowledge  of 
finance  and  of  currency :  the  first  principles  of  which 
are  never  changed  or  varied  by  the  ingenuity  of  man,  or 
the  "  collective  wisdom"  of  legislatures.  It  may  be  dam- 
med up  in  one  direction,  but  it  will  flow  back,  and  through 
other  channels  find  its  level.  The  currency  of  the  country, 
as  has  ben  remarked,  consists  of  the  precious  metals,  coined 
into  various  shapes  and  forms,  and  stamped  in  mills  with 
the  heads  of  the  rulers  of  the  nations,  or  with  their  nation- 
al honors,  or  some  emblem  or  device  adapted  to  their 
country. 

In  order  to  obtain  a  thorough  knowledge  of  currency, 
we  must  understand  what  currency  is,  and  what  wealth  is, 
and  what  capital  is.  Wealth  is  riches,  money,  or  pre- 
cious goods,  whether  productive  or  unproductive,  whether 
convertible  or  inconvertible,  whether  moveable  or  fixed, 
or  whether  unchangeable  and  uniform,  or  of  an  unknown 
and  ideal  value.  But  in  all  this  where  is  the  repre- 
sentative of  value  ?  The  wealth  of  any  person  must 
possess  substance  ;  it  must  be  tangible — it  must  be  compo- 
eed  of  that  which  costs  labor  and  care,  and   thought ;  it 


duncombe's  f^ee  banking.  325 

must  be  that  wKicli  can  be  enjoyed,  possessed  and  known, 
either  as  a  comfort  or  luxury  of  life,  or  it  must  be  some- 
thing that  will  produce  or  can  be  exchanged  for  that  which 
adorns,  beautifies  or  gives  support  or  comfort  to  man. 

To  a  correct  knowledge  of  any  art  or  science,  two  things 
are  necessary ;  firstly,  an  acquaintance  with  the  elementa- 
ry principles  of  the  art  or  science  ;  and  secondly,  a  distinct 
knowledge  of  the  technicalities  or  language  of  the  art  or 
science.  As  this  work  is  designed  principally  for  the  bene- 
fit of  the  youth  of  these  United  States,  it  may  not  be  amiss 
to  define  the  terms  most  frequently  used,  while  speaking 
upon  this  subject. 

Currency  may  be  defined  to  be  circulation;  passing  from  hand 
to  hand;  generally  received;  the  rate  at  which  any-  thing  is  vul- 
garly valued ;  the  papers  stamped  in  the  English  Colonies  by  au- 
thority, and  passing  for  money. — Walker. 

Money — Metal  coined  for  the  purposes  of  commerce. — Walker. 

Money  is  applied  to  every  thing  which  serves  as  a  circulating 
medium. — George  Crabbe's  English  Synonymes. 

Wealth  is  that  positive  and  substantial  share  in  the  goods  of  for- 
tune which  distinguish  an  individual  from  his  neiglibors,  by  put- 
ting him  in  the  possession  of  all  that  is  commonly  desired  and  sought 
after  by  man. 

His  best  companions,  innocence  and  health, 
And  his  best  riches,  ignorance  of  wealth. 
He  who  has  money  has  great  wealth. 

Along  the  lawn,  where  scattered  hamlets  rose, 
Unwieldy  wealth  and  ponderous  pomp  arose. 

Goldsmith. 

The  WEALTH  of  a  nation  must  be  procured  by  the  industry  of  its 
inhabitants.  We  speak  of  wealth  as  it  raises  a  man  in  the  scale  of 
society.   The  wealthy  merchant  is  an  important  member  of  society. 

Crabbe's  Synonymes. 

The  capital  of  the  young  American  frequently  consists 

exclusively  of  a  sound  constitution,  a  clear  conscience,  with 

habits  of  industry  and  economy  :  his  money  is  his  time,  and 

his  currency  is  his  labor. 

The  capital  of  the  North  American  Indian  is  his  hunting 
b2* 


326  buncombe's  free  banking. 

ground,  whlcli  lie  possesses  in  common  with  his  tribe  ;  his 
bow  and  arrows  and  his  skins,  with  a  few  trophies  of  the 
field  or  of  the  chase — and  the  latter  of  these  comprise  his 
wealth. 

The  capital  of  the  merchant  consists  of  ships,  cargoes  of 
agricultural  produce,  merchandise,  and  provisions  for  his 
crew. 

The  capital  of  the  farmer  consists  of  lands,  houses,  cat- 
tle, horses,  hogs,  sheep,  poultry,  waggons,  harnesses, 
ploughs,  harrows,  spades,  shovels,  hoes,  axes,  and  the 
whole  long  list  of  farming  utensils,  with  provisions  for  man 
and  for  beast,  and  seed,  manure,  clothing  and  implements 
of  husbandry  and  gardening. 

The  capital  of  the  mechanic  consists  of  his  tools  and 
machinery  of  his  trade,  his  shop  or  factory,  and  the  neces- 
sary grounds  for  yard,  out-houses  for  storing  materials,  and 
raw  materials,  together  with  his  stock  in  the  factory,  and 
the  manufactured  articles. 

The  capital  of  a  state  consists  of  the  productive  labor 
and  industry,  as  well  as  the  property  of  all  the  inhabitants; 
rail  roads,  canals,  ferries,  wild  lands,  duties  on  importations^ 
on  licenses,  patents,  &c.;  duties  collected  on  sales  at  auc- 
tion, on  tavern  licenses,  and  on  all  other  taxable  or  dutiable 
articles. 

Yet,  from  the  government  of  the  state  by  the  monarch 
on  his  throne,  to  the  Indian  who  roams  the  forest  wild,  and 
free  as  the  wind  that  warns  him  of  the  necessity  of  his  buf- 
falo, bear,  or  beaver  skin,  none  take  promises  for  capital — 
none  consider  promises  wealth — and  none  consider  promi- 
ses productive  industry.  All  prefer  the  substance  to  the 
shadow.  The  only  use  of  cash  is  as  a  measure  of  the  value 
of  other  materials,  and  as  a  medium  of  exchange ;  as  being 
more   convenient  for  circulation  than  grosser  or  more  per- 


buncombe's  free  banking.  827 

isliable  articles  ;  as  possessing  the  greatest  and  most  perma- 
nent intrinsic  value  within  the  smallest  weight  and  bulk  of 
any  commodity  known  to  all  nations. 

The  amount  of  capital  that  the  state,  the  merchant,  the 
farmer,  or  the  mechanic  possesses,  indicates  the  number  of 
men  that  can  be  employed  and  paid,  and  the  quantity  of  ma- 
terial, and  the  amount  of  business  that  can  be  performed,  in 
all  these  operations.  Money,  cash,  coin,  is  only  the  instru- 
ment, the  medium  of  circulation,  between  persons  not  re- 
quiring the  interchange  of  their  own  products.  That  is,  A, 
an  iron  manufacturer,  requires  flour,  pork,  beef,  and  veget- 
ables, for  the  support  of  his  laborers,  from  the  farmer,  who 
does  not  require  iron  in  full  for  his  products,  as  he  requires 
the  necessaries  for  his  family,  and  something  to  pay  his 
workmen.  The  instrument'  that  both  can  use,  is  money  ; 
that  is,  therefore,  used  as  the  medium  with  which  the  far- 
mer can  buy  merchandise,  clothing  and  groceries,  from 
stores  or  hawkers,  who  would  not  take  iron  in  exchange 
for  their  commodities.  Money  is  the  instrument,  the  medium 
that  each  class  of  society  can  use  ;  and  hence  its  true  title  of 
currency  and  of  medial  commodity.  Money,  then,  is  the 
measure  of  value  of  all  the  different  commodities  that  com- 
prise the  whole  capital  of  the  community — the  whole  ag- 
gregate mass  of  things  possessing  exchangeable  value, 
which  are  destined  to  supply  the  necessities,  the  comforts, 
and  the  luxuries  of  life,  or  which  is  intended  to  be  employ- 
ed in  the  production  of  other  things  with  such  ultimate 
view. 

As  a  measure  of  value,  paper  issued  and  intended  to 
pass  and  circulate  as  money,  can  only  be  used  so  long  as  the 
measure  is  correct,  that  is,  so  long  only  as  the  value  of  the 
note,  from  its  perfect  convertibility,  is  of  the  exact  value 
with  the  coin  it  represents.     But  as  neither  the  medium 


328  duncombe's  free  banking* 

when  coin,  nor  when  the  representative  of  coin,  is  among 
the  conveniences,  necessaries,  or  luxuries  of  Hfe,  as  food  or 
clothing,  let  us  examine  the  difference  between  them,  in 
order  the  better  to  understand  their  respective  values.  The 
precious  metals  have  cost  much  labor,  and  other  converti- 
ble commodities,  to  produce  them,  as  rent  of  ground,  cost 
of  provisions  and  labor  in  smelting  and  assaying,  and  in 
transportation  to  market,  or  to  the  mint  to  be  coined.  In  the 
United  States  there  is  no  seigniorage  or  charge  for  coining. 
Besides,  the  precious  metals  possess  a  value  independent  of 
the  value  given  to  them  by  the  common  consent  of  the 
commercial  world  :  they  are  the  most  valuable  metals  of 
which  to  form  certain  materials  for  use  and  ornament, 
which  give  them  an  intrinsic  value  greater  than  that  of  most 
other  materials  ;  so  that,  should  the  nations  of  the  whole 
earth  agree  to  substitute  some  other  commodity  in  lieu  of 
gold  and  silver  as  the  measure  of  value  and  circulating  me- 
dium, it  would  not  probably  materially  lessen  the  value  of 
the  precious  metals  as  bullion.  Some  nations,  at  this  mo- 
ment, circulate  other  materials  than  gold  and  silver  for  their 
currency ;  as  shells  among  the  Africans — bags  of  valueless 
materials  among  the  Arabs — and  furs  among  the  Northern 
Indians.  The  Chinese  use  for  their  currency,  and  circulate 
as  their  only  money,  square  bits  of  metal,  with  a  hole  in  the 
centre,  by  which  they  are  strung  on  a  string.  In  Mexico,  cop- 
per, coined  for  the  purpose,  passes  as  money  at  fur  above  its 
value — and  great  injustice  is  stated  to  have  been  done  by  that 
government  to  the  commercial  and  monied  portion  of  their 
community  recently  by  the  lessening  the  legal  value  of  the 
copper  coin. 

The  same  method  of  alloying  the  coins  of  dilferent  coun- 
tries, to  increase  the  revenue,  or  lessen  the  claims  against 
the  government,  and  for  other  purposes,  have  been  frequent- 


buncombe's  free  banking.  329 

ly  adopted  in  the  old  world.  The  coins  retain  the  same 
denomination,  but  are  diminished  in  weight,  or  in  purity,  or 
in  both — so  as  to  contain  less  of  the  precious  metals  in  them 
than  before — whilst  they  are  declared  to  be  legal  tenders 
for  the  discharge  of  debts,  for  an  equal  number  of  former 
coins,  contracted  long  before  the  alteration  took  place. 

In  England,  the  pound  of  silver,  which  was  originally 
coined  into  twenty  equal  parts,  called  shillings,  by  succes- 
sive diminutions  and  real  alterations,  both  by  lessening  the 
fineness  and  diminishing  the  weight,  has  been  coined  into 
sixty-six  pieces — each  of  which  retain  the  name  or  denomin- 
ation of  shilling ;  and  by  law,  twenty  of  these  shillings  are 
made  legal  tender  for  the  payment  of  a  debt  contracted  when 
twenty  shillings  contained  a  pound  of  silver.  And  the  fraud 
thus  practiced,  has  been  greatly  increased  by  the  introduc- 
tion into  circulation  of  large  quantities  of  credit  paper  in- 
tended to  circulate  as  money. 

In  France,  the  livre,  or  pound  of  silver,  has  been  redu- 
ced by  a  similar  succession  of  legal  frauds  to  the  present 
livre  or  franc,  equivalent  to  less  than  one-fifth  part  of  a  Span- 
ish milled  dollar. 

The  recent  reduction  and  deterioration  of  the  gold  coins 
of  the  United  States,  had  precisely  the  same  effect  upon 
creditors,  where  the  contract  was  to  be  paid  in  gold  coin,  (if 
any  such  contracts  existed.)  But  no  great  injustice  could 
have  been  done  by  the  passage  of  this  law  in  the  U.  States 
as  the  gold  coins  were  previously  valued  by  tale  below  their 
market  price,  when  compared  with  silver,  or  with  most  for- 
eign gold  coins.  It  was  also  thought  to  be  expedient  to 
prevent  its  exportation.  This  latte»-reason  is  a  sad  apology 
for  injustice,  however  slight  the  wrong.  But  when  the 
greater  evil  of  limited  responsibility  chartered  bank  notes 
is  compared  with  it,  we  are  led  to  say  that  congress  chose  the 


330  buncombe's  free  banking. 

lesser  of  the  two  evils;  besides,  while  the  eagle  contained  247  J 
grains  of  pure  gold,  as  it  did  until  the  passage  of  the  "  gold 
bill"  in  1834,  and  as  amended  in  1837,  by  which  the  quantity 
of  pure  gold  in  the  eagle  was  reduced  to  232^  grains, 
whenever  the  rate  of  exchange  was  against  the  U.  States, 
the  high  price  of  American  eagles  in  England,  made  them 
desirable  articles  of  exportation,  both  on  that  account  and 
on  account  of  their  being  less  weighty  or  bulky  than  silver, 
and  equal  to  foreign  coin  in  England,  as  compared  with  their 
mint  value  in  the  United  States, 

Now  let  us  examine  the  intrinsic  value  of  paper  money, 
and  compare  that  with  the  intrinsic  value  of  gold  and  silver. 
The  paper,  intended  to  circulate  as  money,  is  comparatively 
of  no  value,  except  what  is  given  it  by  law.  Previous  to 
stamping,  engraving  and  printing,  very  little  labor  or  cost 
had  been  expended  upon  it,  and  its  value,  having  been  made 
of  old  rags,  (even  although  they  be  silk  rags,)  was  almost 
nothing.  This  fact  any  one  may  easily  prove  by  offering 
an  unexecuted  bill  in  the  market. 

The  value  of  paper  money  is  purely  a  credit  value,  giv- 
en to  it  by  its  execution  under  a  special  law,  authorising  its 
issue  and  circulation  as  money.  And  when  perfectly  con- 
vertible, its  increased  value  consists  in  its  affording  facilities 
of  transportation  greater  than  that  possessed  by  the  precious 
metals — provided  the  paper  be  current  throughout  the  Un- 
ion. The  saving,  of  what  would  otherwise  be  lost  by  the 
wear  and  tear  of  the  precious  metals  when  they  are  con- 
stantly in  circulation,  by  their  abrasion,  gives  paper  money 
another  advantage  over  the  precious  metals.  But,  if  state- 
mients  that  I  have  seen  be  correct,  as  to  the  injury  of  gold 
and  silver  coins  by  use,  by  which  large  silver  coin  are  esti- 
mated not  to  become  defaced,  or  have  their  weight  lessened 
so  much  as  to  require  a  new  coinage  necessary  oftener  than 


duncombe's  free  banking.  331 

once  in  every  hundred  years,  and  large  gold  coins  not  of- 
tener  than  once  in  two  hundred  years,  the  saving  of  the  pre- 
cious metals,  by  the  use  of  paper  to  circulate  as  money, 
would  be  but  a  small  per  centage  upon  the  commercial 
world,  unworthy  of  comparison,  or  even  mention,  in  oppo- 
sition to  the  annual  loss  sustained  by  the  people  upon  un- 
current  chartered  bank  paper.  There  is  no  equal  compar- 
ison between  the  cost  of  producing  a  given  large  amount  of 
the  precious  metals,  and  an  equal  nominal  amount  of  paper 
money,  whereby  the  profits  upon  the  precious  metals  em- 
ployed in  commerce,  or  converted  into  capital,  is  in  favor  of 
the  use  of  paper  for  a  circulating  medium.  Yet,  long  and 
sad  experience  has  proved,  that  the  loss  sustained  by  the 
public  from  the  depreciation  of  chartered  bank  paper,  is 
uniformly  far  greater  than  the  profits  made  upon  the  expor- 
tation of  specie,  or  its  employment  as  capital. 

The  question  then  stands  thus  :  if  there  be  no  intrinsic 
value  in  the  papc^r  used  as  money,  and  if  the  cost  of  pro- 
ducing gold  and  silver  coin  be  nearly  equal  to  its  value  when 
coined  for  circulation — if  there  be  not  a  sufficient  quantity 
of  the  precious  metals  to  serve  as  an  instrument,  with 
which  every  class  of  citizens  may  labor  equally  profitably, 
or,  to  use  the  ordinary  phrase,  if  there  be  not  a  sufficient 
medial  commodity  of  the  precious  metals  for  the  business 
circulation  of  the  country — who  then  ought  to  give  an  ad- 
ditional nominal  value  to  the  material  that  is  to  supply  its 
place,  and  make  up  the  deficiency  of  the  precious  metals  ? 
And  if  any  seigniorage  or  other  profit  is  to  be  made  upon 
the  currency  that  is  to  supply  the  place  of  the  precious 
metals,  ought  it  to  be  received  and  enjoyed  by  the  people^ 
who  are  the  sovereign  power  1  or  ought  these  profits,  with 
this  immense  power  and  privilege,  to  be  given  to  a  few  in- 
dividuals, for  their  private  interest  and  aggrandizement,  to 
the  exclusion  of  the  whole  people  ? 


332  duncombe's  free  banking. 

Whether  these  men  have  made  themselves  favorites  by 
merit,  or  by  bribery  and  corruption,  or  by  sycophancy,  it 
matters  not,  so  far  as  the  solution  of  this  question  is  con- 
cerned. 

The  question  is,  who  shall  supply  the  deficiency  of  the 
precious  metals — give  an  artificial  value  to  some  commodi- 
ty to  supply  their  place,  and  enjoy  the  benefits  derivable 
from  this  substitution  ?  To  answer  this  question  correctly, 
let  us  enquire  what  was  the  opinion  of  the  founders  of  this 
republic,  and  what  the  practice  of  European  financiers  upon 
similar  subjects. 

The  framers  of  the  constitution  say,  "  Congress  shall 
have  power  to  coin  money,  and  regulate  the  value  thereof, 
and  of  foreign  coins." 

Clearly  to  comprehend  this  sentence,  let  us  observe  the 
signification  of  the  verb  to  "  regulate,"  as  established  by 
the  best  English  writers. 

To  regulate y  in  its  most  familiar  acceptation,  signifies  to 
direct,  to  dispose,  to  govern,  to  rule. 

We  direct  for  the  instruction  of  individuals  j  we  regu- 
late for  the  good  order  or  convenience  of  many  ;  we  dis- 
pose for  the  benefit  of  one  or  many.  To  direct  (to  conduct,) 
is  personal,  it  supposes  authority.  To  regulate,  from  the 
IdXin  regular  to  rule,  signifies  to  settle  according  to  a  rule  ; 
is  general,  it  supposes  superior  information.  An  officer, 
directs  the  movements  of  his  men  in  military  operations. 

Canst  thou,  with  all  a  monarch's  cares  opprest ! 

Oh  Atreus  son  !  canst  thou  indulge  thy  rest  1 

111  fits  a  chief  who  mighty  nations  guides, 

Directs  in  council  or  in  war  presides.  Pope. 

The  steward  or  master  of   ceremonies,  regulates  the 

whole  concerns  of  an  entertainment. 

Ev'n  Goddesses  are  women  ;  and  no  wife 

Has  power  to  regulate  her  husband's  life.     Dryden. 


BUNCOMBE  S  FREE  BANKING.  333 

The  constitution  declares,  that  "  Congress  shall  have 
power  to  coin  money,  and  regulate  the  value  thereof,  and 
of  foreign  coin." 

"We  have  been  thus  particular  in  settling  the  definition 
of  the  word  "  regulate,"  to  show  what  the  framers  of  the 
constitution  meant  by  the  regulation  of  the  value  of  money. 
Observe,  it  is  "  money"  that  congress  "  shall  have  power 
to  regulate  the  value  thereof."  Congress  shall  regulate  the 
value  of  money.  Had  the  framers  of  the  constitution  said 
congress  shall  have  power  to  coin  money,  and  fix  the  value 
of  the  coin,  there  could  have  been  no  construction,  other 
than  the  one  expressed,  by  fixing  the  value  from  time  to 
time  of  the  coins,  whether  domestic  or  foreign.  But  the 
term  to  regulate,  we  have  seen  is  the  only  single  word  in 
the  English  language  that  would  have  given  congress  the 
whole  and  entire  regulation  and  control  of  all  the  circula- 
ting medium.  And  to  regulate  the  value  of  money,  we 
have  seen  is  the  most  comprehensive  term,  and  almost  the 
only  one  in  the  English  language  that  would  have  given 
congress  the  same  full,  free,  perfect,  unlimited,  discretion- 
ary power,  evidently  hereby  intended  to  have  been  given 
by  this  clause,  of  doing  all  and  every  act  and  thing,  that 
can  ever  be  found  necessary  or  expedient,  or  that  can  ever 
be  deemed  right,  just,  or  proper,  relating  to  the  value  of 
money  for  the  promotion  of  the  peace,  prosperity,  and  good 
government  of  the  United  States. 

Had  a  limited  power  have  been  intended  to  have  been 
conferred  on  congress  by  that  clause,  and  had  the  acts  of 
congress  relating  thereto  have  been  intended  to  have  been 
restricted  to  the  regulation  of  the  coins,  that  should  circu- 
late in  the  United  States,  that  would  have  been  expressed 
in  words  that  would  clearly  have  conveyed  such  a  mean- 
ing ;  as  from  time  to  time  fixing  the  value  of  the  coins,  &c. 
c2 


334  duncosibe's  free  banking. 

But  to  regulate  the  value  of  money  embraces  the  whole 
subject  matter  under  consideration. 

As  the  steward  or  master  of  ceremonies  regulates  the 
whole  concerns  of  an  entertainment,  so  has  congress  tho 
power  to  regulate  the  whole  concerns  of  the  money-cur- 
rency of  the  country.  Besides,  the  evident  intent  of  the 
framers  of  the  constitution,  in  using  the  word  regulate,  was 
to  confer  the  most  extensive  powers  upon  congress.  Tho 
whole  spirit  of  the  constitution  goes  to  confer  the  power  of 
the  legislation  of  the  country  upon  that  legislature  that  will 
be  the  most  likely  to  comprehend  the  subject,  and  do  it  the 
best  justice.  Whenever  the  states  can  better  promote  the 
peace,  prosperity  and  good  government  of  the  whole  com- 
munity, by  legislating  upon  any  subject  tlian  the  congress 
of  the  United  States  would  be  likely  to  do,  the  power  to 
legislate  upon  that  subject  is  given  to  the  states  ;  but  where 
the  interests  of  this  vast  republic  can  be  better  promoted  by 
a  uniformity  of  the  law,  and  by  its  being  passed  by  con- 
gress, than  by  state  legislatures,  then  congress  has  beec  em- 
powered to  act. 

Few  persons,  if  any,  who  have  travelled  throughoat  the 
United  States,  but  have  felt  the  inconvenience  and  addi- 
tional expense  and  trouble  they  have  sustained  from  local, 
partial,  state  legislation  upon  a  subject  of  such  great  nation- 
al importance  and  general  public  interest  as  currency.  l>ut 
lest  I  should  be  misunderstood,  I  do  not  mean  to  say,  thjit,  al- 
though the  old  United  States  bank  removed  this  inconven- 
ience to  a  very  great  extent,  that  there  were  not  greater  In- 
conveniences and  dangers  attendant  upon  such  an  incorpo- 
ration, than  even  the  lessened  expense  and  trouble  of  the 
present  exchanges.  That  involved  the  liberties  of  the 
whole  people — this  only  robs  the  few  who  travel,  and  taxes 
the  many   who  have  remittances  to   make ;  and,  in  short, 


duncombe's  free  banking.  335 

taxes  tlie  whole  community.  But  more  of  an  United 
States  bank  by  and  bye. 

The  reader  should  be  again  advised,  that  money-curren- 
cy is  one  thing  and  credit  or  commodity-currency  is  an- 
other thing ;  and  that  I  have  never  recommended  the  legis- 
lature of  any  state,  nor  the  congress  of  the  United  States, 
to  interefere  with  the  credit-currency  of  the  country.  I 
have  long  believed  and  taught,  that  the  whole  business  of 
legislation  was  comprised  in  the  protection  of  persons  and 
property  ;  that  we  have  far  too  much  legislation,  and  that 
the  freer  the  currency  of  the  country  is,  the  simpler  and 
more  easily  will  the  subject  of  finance  be  to  be  compre- 
hended ;  and  the  more  certain  will  the  monetary  affairs  of 
the  country  be  well  conducted,  as  they  are  easily  and  well 
understood  by  the  whole  people. 

One  of  not  the  least  important  benefits  anticipated  to  be 
derived  from  the  proposed  system  of  currency  is,  that  it 
closes  all  future  legislation  upon  the  subject  of  the  curren- 
cy, as  effectually  as  is  the  legislation  upon  our  politics  or 
form  of  government  closed.  The  whole  subject  being  re- 
ferred to  the  people — who  are  the  sovereign  power — will 
}>e  thoroughly  comprehended  by  them,  and  there  not  being 
volumes  to  be  read  over  and  over  again  to  be  comprehend- 
ed, like  the  present  unwritten  constitution  of  the  United 
States  upon  the  subject  of  money-currency,  which  must  be 
collected  from  bank  acts,  from  bank  reports,  from  reports 
from  the  different  legislatures  upon  the  subject  of  finance, 
currency  and  banks,  and  reports  from  the  Secretaries  of  the 
Treasuries  of  the  several  States,  and  from  the  Secretary  of 
the  Treasury  of  the  United  States,  from  the  different  Prices 
Current,  and  reports  of  exchanges,  in  newspapers  ;  in 
short,  at  this  moment,  to  comprehend  the  subject  of  cur- 
rency thoroughly,  would  re(^uire  whole  years  of  faithful 


336  buncombe's  free  banking. 

reading  and  study  for  a  man  of  ordinary  acquirements  and 
abilities. 

The  question  of  the  currency  in  the  United  States,  is 
like  the  unwritten  constitution  of  Great  Britain,  to  be  found 
and  comprehended  only  after  great  research,  and  even  then 
left  to  be  confirmed  or  not,  as  it  may  be  expedient  or  inex- 
pedient, with  the  party  in  power. 

The  Constitution  of  England  may  be  collected  from  Black- 
stone's  Commentaries  on  the  laws  of  England,  and  from 
other  books,  reports,  and  decisions  ;  provided  the  doctrines 
or  principles  thus  collected,  when  compared,  accord  with, 
or  promote  the  interests  and  views  of  the  dominant  party  ; 
so  it  is  with  the  currency  of  the  Union.  After  all  the  opinions, 
from  that  of  the  learned  and  able  American  Commentator, 
Kent,  down  to  the  humblest  editor  of  any  periodical  news- 
paper, have  been  read  and  carefully  studied,  if  the  resultis 
not  favorable  to  the  dominant  party,  the  opinion  is  uncon- 
stitutional and  liable  to  rejection. 

I  am  desirous  of  simplifying  the  science  of  money — and 
of  making  it  the  business  of  every  American  to  compre- 
hend it ;  of  indicating  the  means  by  which  the  American 
people  can  exercise  their  inalienable  and  inherent  rights  as 
American  freemen,  with  regard  to  the  subject  of  the  cur- 
rency, as  freely  and  fully  as  they  now  do  their  political 
rights.  They  would  then  learn  economy  in  public,  as  well 
as  in  private  matters ;  and  that  the  man,  whose  expenses 
exceeds  his  income,  and  for  the  balance  lives  upon  credit, 
must  find  himself  annually  more  and  more  in  debt,  not  on- 
ly to  the  additional  amount  of  the  annual  excesses  of  his  ex- 
pensesover  his  income,  but  by  the  addition  of  the  interestof 
his  former  excesses  of  expenses,  and  the  diminished  cred- 
it which  he  possesses,  which  compells  him  to  pay  annually 
higher  and  higher  prices  for  his  purchases,  as  his  prospects 


DTJNCOMBfi'S  FREE  BANKING.  337 

of  punctual  payments  diminish.  He  may  continue  to  live 
in  part  upon  credit  in  this  manner,  so  long  as  money  is  so 
plenty  that*  his  creditors  prefer  the  chance  of  getting  a 
great  profit  by  and  bye  from  him,  to  that  of  receiving  small 
profits  from  punctual  payers  ;  but  the  moment  money  rises 
in  the  market,  this  man  is  called  upon,  and  if  he  cannot  pay, 
his  means  of  subsistence  is  taken  from  him,  and  his  situa- 
tion is  rendered  proportionately  worse  and  worse,  as  he  has 
exceeded  his  actual  means  of  payment. 

The  United  States,  in  a  financial  light,  is  the  same  as  an 
individual.  So  are  the  several  states.  And  our  present 
indebtedness  abroad  is  a  stain  upon  the  American  charac- 
ter, that  can  only  be  obliterated  by  the  extinction  of  that 
disgraceful  transaction  and  debt.  A  national  debt  has 
ever  been  held  in  abhorrence  by  every  lover  of  liberty  and 
eqality — of  independence,  peace  and  plenty  ;  but  the  sale 
of  American  stocks,  and  the  receipt  in  payment  of  old  rags, 
firstly,  in  the  shape  of  imports,  and,  secondly,  in  the  form 
of  limited  responsibility  bank  paper,  from  the  monopolizers 
of  our  currency,  has  establislied  a  national  debt  abroad  of 
greater  evil,  and  of  more  portentious  danger,  to  this  repub- 
lic, than  a  debt  of  ten  times  the  same  magnitude  would  be 
if  due  to  our  own  citizens.  **  The  borrower  is  the  slave  of 
the  lender;"  and  the  creditor  in  England  will  exercise  more 
influence  over  the  future  destinies  of  this  republic,  than  a 
standing  army  of  American  soldiers  ;  for  American  soldiers 
still  are  Americans ;  they  are  men,  possessed  of  a  love  of 
American  institutions,  and  of  liberty  and  equality  ;  but  the 
foreign  monied  aristocrat,  who  must  and  will  hereafter,  if 
not  checked,  decide  the  fate  of  this  republic,  but  who  might, 
if  not  directly  interested  in  the  political  and  financial  econo- 
my of  this   country,  have  remained  silent,  or  only  given  a 

disregarded  sneer  to  Americans  and  American  institutions, 
c2* 


338  buncombe's  tree  banking. 

must  now,  for  his  own  safety  and  the  protection  of  his  pri- 
vate interest,  intermeddle  with  the  political  economy  of 
such  states  as  are  indebted  to  him,  and  even  with  the  do- 
mestic economy  of  its  inhabitants ;  and  all  our  extravagance 
and  indebtedness  and  humiliation  is  to  be  attributed  to  our 
form  of  government,  a  mobocracy,  as  they  sneeringly  term 
this  republic.  The  foreign  money-lender  is  not  to  be  blam- 
ed for  his  inquisitiveness  respecting  our  national  or  domes- 
tic policy,  when  we  apply  to  him  to  lend  us  money.  And 
having  once  lent  us  money,  it  is  not  at  all  surprising  that  he 
should  feel  that  he  too  has  a  right  here  to  protect,  and  ought 
at  least  to  be  allowed  to  express  his  opinions  freely  of  our 
institutions,  of  public  policy  and  economy,  as  well  as  of  the 
men  and  measures  of  the  government  generally.  This, 
however,  must  annually  lead  to  greater  and  more  danger- 
ous interference  of  aristocrats  with  republican  institutions. 
And  so  long  as  the  currency  of  the  country  is  anti-republi- 
can, and  so  long  as  foreign  aristocrats,  through  their  connec- 
tion with  our  credit-currency,  exercise  an  influence  over 
our  money-currency  ;  that  is,  so  long  as  incorporated  banks 
make  up  the  deficiency  between  the  precious  metals  and 
the  amount  of  currency  required  for  the  circulating  medium 
of  the  country,  so  long  must  the  republican  institutions  of 
the  country  be  constantly  opposed  in  principle  and  in  prac- 
tice by  the  money  power  of  the  country,  and  so  long  must 
credit  serve  to  amuse  the  people,  enrich  the  few,  and  im- 
poverish the  many.  Money  has  a  natural  tendency  to  ac- 
cumulate in  amount,  and  in  its  influence ;  and  whenever 
the  money  power  (perhaps  I  ought  to  have  called  it  the 
credit  power)  of  the  banks,  shall  be  greater  and  stronger 
than  the  democracy  of  the  country,  the  democracy  of  the 
country  will  yield  to  the  aristocracy  of  money  and  credit, 
tl^e  money  of  foreigners  and  the  credit  of  banks,  will  pror 


339 

duce  annual  changes  in  the  administrations  of  this  republic, 
until  the  democracy  of  numbers  will  be  sneered  at,  as  much 
by  the  native  American  as  it  is  now  despised  by  the  foreign 
aristocrat,  who  holds  that  wealth  only,  or  at  least  principal- 
ly, should  be  represented.  This  is  the  first  step  in  a  policy, 
by  which  the  many  are  made  to  serve  the  few ;  and  which 
can  only  end  in  a  strong  splendid  government,  with  a  weak 
impoverished  people. 

If  these  portentious  evils  are  the  natural  effects  of  the 
existence  of  incorporated  banks,  and  the  consequent  ex- 
tension of  the  credit  system,  are  we  not  instinctively  led  to 
enquire  after  a  remedy  1 

To  judge  correctly  of  the  necessary  remedy,  we  must 
clearly  understand  the  nature  of  the  complaint.  And  as  in- 
corporated banks,  with  limited  responsibility,  are  charged 
with  being  the  first  stepping  stone  in  the  road  to  ruin,  and  in 
the  march  of  excesses,  by  which  the  free  citizens  of  this  Amer- 
ican Republic  are  being  bound  out  to  English  task -masters, 
as  "hewers  of  wood  and  drawers  of  water,"  to  pamper 
the  pride  and  flatter  the  vanity  of  the  very  nation  from  whom 
they  boast  ofhaving  gained  their  independence — vain  boast! 
delusive  glory!  fallacious  flattery  !  If  an  English  heartless 
monied  aristocracy  are  again  to  claim  us  as  tributaries,  let  no 
American  lay  the  flattering  unction  to  his  soul,  that  our  fore- 
fathers resisted  their  encroachments  upon  our  liberties  : 
they  fought  and  conquered,  and  so  can,  and  so  will  we.  But 
remember  that  then  we  were  unwilling  slaves — we  had 
never  consented  to  the  terms  of  our  humiliation ;  now  we 
forge  the  gilded  chains  that  bind  us,  and  entail  to  our  poster- 
ity a  T\B.tiojiBlJbreign  debt,  and  habits  of  excess  in  expenses 
exceeding  our  incomes,  that  could  not  be  enjoyed  except 
by  the  abuse  of  sound  and  healthful  credit. 

5*0  see  the  justice  of  the  charge,  made  against  chartere4 


340  buncombe's  free  banking. 

banks,  with  limited  responsibility,  let  us  refer  to  our  former 
description  of  banks,  and  briefly  recapitulate  the  different 
kinds  of  banks,  and  the  use  of  each,  necessary  to  the  illus- 
tration of  our  subject. 

Banks  we  have  divided  into  three  great  classes,  banks  of 
deposite,  banks  of  discount,  and  banks  of  issue.  The  latter 
frequently  embracing  all  the  duties,  and  performing  all  the 
functions,  of  the  three  classes.  And  whether  these  be  es- 
tablished by  joint  stock  companies,  or  by  private  individu- 
als, by  special  local  legislation,  or  by  some  general  banking 
law,  or  by  common  consent  without  any  legislation  upon 
the  subject,  these  three  kinds  of  banks  embrace  all  that  is 
necessary  for  us  to  examine  to  the  comprehension  of  our 
subject. 

Banks  of  deposite  and  banks  of  discount  were  the  only 
banks  known  to  the  ancients. 

The  introduction  of  banks  of  issue,  has  produced  a  new 
<3ra  in  banking  and  in  currency.  Formerly,  currency  was 
uniform,  or  nearly  so  ;  it  may  now  be  divided  into  money- 
currency,  and  credit  or  commodity-currency,  as  connected 
with  the  different  kinds  of  banks. 

And  here  allow  me  to  digress  from  the  description  of 
banks,  to  show  the  nature  and  character  of  the  different 
currencies,  or  of  the  money-currency  and  the  credit  or  com- 
modity-currency. 

Money-currency  comprises  only  the  precious  metals,  and 
such  paper  passing  for  money  as  is  always  perfectly  conver- 
tible into  specie  at  sight,  under  every  situation  and  state  of 
trade,  such  as  the  notes,  bills,  and  other  transfers  and  evi- 
dences of  debt  in  banks  of  deposite  and  of  banks  of  discount. 

Credit  or  commodity' -currency,  consists  of  such  bank 
notes,  drafts,  bills  of  exchange,  and  mercantile  remittances, 
as  are  convertible  under  ordinary  circumstances  into  specie 


buncombe's  free  banking.  341 

at  sight,  or  at  fixed  periods  of  time,  as  at  the  maturity  of  a 
bill,  or  at  a  time  nearly  fixed,  as  at  the  arrival  of  a  cargo, 
or  on  the  arrival  of  some  other  probable  event,  but  yet  de- 
pendant upon  the  possibility  of  defeat  from  the  casual  hap- 
pening or  not  happening  of  some  circumstance  or  contin- 
gency. 

This  will  be  better  comprehended,  by  bearing  constantly 
in  mind  the  difference  in  the  business  of  the  different  kinds 
of  banks. 

In  banks  of  deposite,  specie  is  only  kept ;  the  credits  on 
the  books  of  the  bank  represent  certain  quantities  of  bul- 
lion, ascertained  by  weight  and  placed  there  for  safe  keep- 
ing, without  any  power  or  authority  on  the  part  of  the  di- 
rectors of  the  bank  to  lend  it,  or  use  it,  until  it  is  called  for 
by  its  owners,  or  transferred  by  bills  or  drafts,  or  by  entries 
upon  the  books  of  the  bank  to  other  persons.  This  bank 
greatly  facilities  mercantile  transactions,  by  safely  keeping 
large  sums  of  money  that  would  otherwise  require  to  be 
kept  in  iron  chests  ;  by  saving  the  labor  of  repeated  count- 
ings, and  of  removal  from  house  to  house,  as  well  as  dimin- 
ishing the  risk  by  fire  and  other  casualties,  and  the  wear 
and  tear  of  the  precious  metals  by  friction.  This  bank  pa- 
per is  perfectly  convertible  on  all  occasions,  as  the  amount 
of  bullion  is  actually  in  the  vaults  of  the  bank,  and  may  be 
weighed  to  any  person  who  should  desire  to  remove  his 
amount.  Hence,  the  impression  upon  the  mind  of  every 
person  originally  is,  that  bank  paper  is  money,  and  is  per- 
fectly convertible  into  specie,  as  are  the  notes  of  banks  of 
deposite,  where  there  can  be  no  doubt  of  the  bills,  notes, 
checks,  or  drafts  of  the  depositors,  being  positively  and  hona 
fide  paid  at  sight. 

Banks  of  discount,  too,  were  used  long  before  the  intro- 
duction of  banks  of  credit  circulation.     They  are  generally 


342  DrNCOMBE's  FREB  BANKING. 

companies  of  monied  men,  associated  together  to  maintain  a 
survivorship,  and  for  the  purpose  of  lending  their  money  to 
the  best  advantage,  and  to  prevent  an  unnecessary  compe- 
tition among  themselves  in  the  business  of  money  lending. 
They  become  a  monopoly,  and  regulate  the  price  of  the 
loan  of  money  as  suits  themselves. 

Banks  of  discount  lend  money,  by  discounting  promisso- 
ry notes  and  acceptances,  originating  in  the  sale  of  proper- 
ty, having  but-short  periods  to  run.  They  also  receive  mon- 
ey on  deposite  at  a  small  rate  of  interest,  or  only  for  the  val- 
ue of  its  safe  keeping,  for  an  indefinite  period  or  for  fixed 
periods.  This  money  they  lend,  with  their  own  capital,  in 
discounting  business  paper. 

In  some  respects,  the  banks  established  under  the  author- 
ity of  the  New  York  General  Banking  law,  resembles  banks 
of  discount.  As  one  company  may  furnish  the  funds  de- 
posited with  the  Comptroller  of  State,  in  security  for  the 
blank  bank  notes  intended  to  be  executed  and  circulate  as 
money,  and  another  company  may  (if  the  depositors  choose 
to  employ  them,)  take  the  management  of  the   discounts. 

I  can  easily  conceive  a  case,  in  which  a  bank  established 
under  this  law,  would  nearly  resemble  a  bank  of  discount. 
Suppose  the  farmers  of  a  neighborhood  to  mortgage  their 
fiirms,  and  pledge  their  government  debts  with  the  Comp- 
troller of  State,  to  the  value  of  $100,000,  in  the  hope  of  ma- 
king their  own  money,  and  keeping  their  property  besides, 
and  then  lending  their  money  at  six  per  cent.,  having  only 
twelve  and  a  half  per  cent,  of  their  circulation  necessarily 
to  be  kept  in  their  vaults  :  it  will  pay  them  the  interest  of  a 
dollar  for  each  shilling  in  their  vaults ;  so  that  the  interest  of 
the  S100,000  thus  loaned  will  be  six  thousand  dollars  a 
year — ^while  the  deposite  would  only  bring  in  interest  of 
$750,  leaving  a  balance  of  $5,260.  The  extra  profits  of  the 


buncombe's  free  banking.  343 

business  of  banking — loss  of  notes  by  accidents  to  note- 
holders, &c. — is  nearly  or  quite  equal  to  the  increased  ex- 
penses of  loaning,  by  banking,  the  $100,000  in  paper,  above 
the  expenses  of  loaning  the  amount  of  the  deposite  in  spe- 
cie. Upon  this  calculation,  it  would  not  be  surprising  if 
farmers,  with  a  little  money,  and  a  great  love  of  money, 
pride  and  ambition,  should  attempt  to  multiply  their  inter- 
ests by  eight,  since  they  would  receive  their  interests  on 
their  mortgages  if  they  were  real,  and  upon  their  govern- 
ment debts,  just  the  same  in  the  hands  of  the  Comptroller^ 
as  if  they  were  in  their  own  drawers. 

Then,  suppose  these  farmers  to  employ  bankers  and 
financiers  to  transact  their  banking  business :  their  bank 
would  become  a  bank  of  discount.  The  farmers  are  not 
holden  for  one  shilling  beyond  the  amount  of  their  depos- 
ites  with  the  Comptroller,  and  that  security  is  not  a  per- 
sonal security,  but  a  property  security,  and  the  directors  of 
the  bank  of  discount  are  not  bound  for  one  shilling,  either 
in  their  private  or  associated  capacity  ;  for,  although  they 
may  sue  and  be  sued,  the  funds  of  the  bank  only  are  held 
for  the  judgement  that  may  be  obtained  against  them. 

The  only  banks  in  the  United  States  that  more  perfectly 
are  banks  of  discount,  than  the  banks  established  under  the 
General  Banking  Law,  are  the  offices  where  money  is  loan- 
ed by  brokers  in  New  York,  and  perhaps  some  other  cities. 
The  great  evil  of  these  offices  is,  that  the  brokers  are  in  no 
way  responsible  for  the  redemption  of  the  paper  they  put 
in  circulation.  They  often  lend  the  poorest  credit  paper 
money,  as  they  can  borrow  or  buy  that  money  at  a  very 
cheap  rate  and  lend  it  at  par,  or  often  even  at  an  advance 
while  money  is  scarce  and  the  rate  of  interest  on  money 
high. 

These  brokers'  offices,  or  banks  of  discount,  are  suppo*- 


344  OUNCOMBE  S  FREE  BANKING. 

sed  to  loan  only  their  own  money,  which  they  have  bought 
or  borrowed.  Perhaps,  at  times,  they  become  the  secret 
agents  of  banks,  and  lend  their  money  for  a  commission 
when  money  is  scarce  and  the  rate  of  interest  high,  or 
when  the  banks  from  any  cause  do  not  discount  publicly — 
as  when  the  rate  of  interest  should  be  three,  four,  or  five 
per  cent,  a  month,  and  the  charter  of  the  bank  would  not 
allow  them  to  receive  more  than  lawful  interest,  they  could 
double  or  treble  their  profits  by  changing  their  business  and 
not  discounting  paper  for  the  public,  but  by  engaging  a  bro- 
ker to  loan  it  for  them  at  as  high  a  rate  as  he  can  get.  Or 
they  may  sometimes  employ  a  broker  during  suspensions, 
when  the  banks  are  not  supposed  to  be  in  funds. 

In  the  large  cities  on  the  continent  of  Europe,  they  do 
not  issue  notes ;  and  in  England,  many  of  the  banks,  ex- 
cept the  bank  of  England,  are  banks  of  discount,  strictly 
speaking.  They  loan  only  bank  of  England  paper — 
which,  by  the  bye,  is  lawful  tender  in  the  payment  of  all 
debts  except  those  of  the  bank  of  England.  The  notes  of 
the  bank  of  England  are  truly  the  lawful  currency  of  the 
kingdom.  In  England,  and  on  the  continent,  discounts  are 
paid  only  in  money  :  an  important  distinction  between  dis- 
counts there,  and  discounts  here,  where  you  receive  only 
promises  to  pay,  in  which  there  is  very  great  uncertainty — 
for  the  limited  responsibility-principle  has  made  the  notes 
of  the  banks  frequently  less  secure  than  the  private  notes 
of  individuals  they  receive  in  exchange.  The  latter  is 
upon  interest,  or  pays  interest  in  advance ;  yet  that  is  not 
equivalent  to  the  name  of  money,  and  the  fine  figured  silk 
paper,  upon  which  the  bank  promise-to-pay  is  printed,  are 
given  with  limited  responsibility  in  exchange. 

The  separation  of  the  bank  of  issue  (the  Comptroller's 
office,)  from  the  bank  of  discount,  under  the  provisions  of 


duncombe's  free  banking.  345 

l\io  New  York  General  Banking  law,  evidently  lessens  the 
temporary  facility  of  expansion  ;  yet,  so  long  as  credit  is 
used  as  capital,  and  private  interested  individuals  are  allow* 
ed  to  interfere  with  the  currency  of  the  country,  there  will 
be,  there  must  naturally  be,  by  the  laws  of  self-love,  and 
power  uncontrolled,  excessive  expansions  of  the  currency 
and  ruinous  contractions,  with  occasional  suspensions  and 
frequent  total  failures  of  banks  and  bank  notes. 

Admitting  that  this  law  provides  perfect  security  for  the 
bill-holder,  (which,  by  the  bye.  Is  very  doubtful,)  and  re- 
moves the  office  of  issue  from  the  office  of  discount,  and 
from  all  sympathy  and  interest  with  the  borrower,  yet  still 
the  bills  are  issued  upon  credit,  the  kind  of  security  for  the 
payment  of  the  bills  only  is  changed,  and  instead  of  per- 
sonal security,  this  law  provides  funded  debts  or  landed 
security.  It  is  still  credit,  and  credit  still  connected  with 
private  interest ;  and  it  must  be  subject  to  those  immuta- 
ble laws  by  which  credit,  trade  and  commerce  are  governed. 
The  umformity  of  the  currency,  that  would  soon  be  es- 
tablished throughout  the  state  by  the  adoption  of  this  sys- 
tem of  banking  generally,  is  highly  desirable  ;  but  uni- 
formity is  not  all  that  is  necessary  to  a  perfectly  sound  cur- 
rency. The  principles  of  responsibility  and  convertibility 
are  also  highly  necessary.  But  this  will  not  be  likely  to  be 
obtained,  until  the  directors  of  the  currency  are  a  part  and 
parcel  of  the  people,  elected  and  chosen  by  themselves 
and  accountable  to  themselves  for  the  faithful  discharge  of 
their  duties.  Until  that  time,  there  can  be  no  safety,  no 
reliance  upon  paper  intended  to  circulate  as  money.  It  is 
the  highest  injustice,  and  a  most  disgraceful  reflection  upon 
the  intelligence  and  integrity  of  the  people,  to  refuse  to 
give  them  the  election  of  the  directors  of  the  currency  upon 
the  ground,  that,  although  thev  may  govern  themselves  in 
d2 


346  DUNCOMBE  S  FRSE  BANKING. 

political  matters,  yet  that  they  are  incompetent  to  govern 
the  currency.  That  they  would  not  elect  proper  persons 
for  the  management  of  money  :  as  though  the  people  would 
be  more  liable  to  err  upon  a  matter  of  the  deepest  interest 
and  daily  business  with  themselves,  than  they  would  upon 
the  subject  of  religion  or  literature  and  of  politics.  When 
will  the  free  born  sons  of  America  show  to  the  world,  that 
they  ^refree  and  independent  of  both  the  money  power  and 
the  "  statesman's  pomp,  and  churchman's  "  pride  of  Eng- 
land ]  There  is  no  standing  still  in  currency  any  more 
than  in  politics.  We  must  be  running  deeper  and  deeper 
in  debt,  or  we  must,  by  retrenching  our  expenses  and  les- 
sening our  imports,  be  regularly  lessening  that  debt.  If 
we  firmly,  zealously  and  faithfully  adhere  to  principles  of 
economy  and  punctuality  in  all  our  commercial  transactions, 
we  may  lessen  our  imports  to  the  par  exchange  of  our  ex- 
ports, and  finally  release  ourselves  from  the  baneful  effects 
of  a  foreign  monetary  domination,  but  if,  on  the  contrary, 
every  succeeding  year  is  to  bring  its  additional  hundred  of 
millions  of  dollars  of  debt,  we  may  rest  assured  that  if  we 
have  not  a  Queen  to  reign  over  us,  we  shall  bow  with  great 
respect  and  deference  to  the  London  Exchange.  The  only 
difference  between  the  regal  and  monetary  domination, 
will  be,  that  we  may  quote  the  authority  of  Thread-Needle 
Lane  in  London,  instead  of  Downing  street  and  the  Royal 
Palace,  for  the  justification  of  our  financial  or  political  con- 
duct. 

The  reader  may  begin  to  tire  of  my  repeated  intimation 
of  fatal  consequences  from  this  unlimited  extension  of  cred- 
it, but  rest  assured,  the  rising  generation  will  not  sneer  at 
its  effects  when  they  are  groaning  under  its  weight. 

There  is  an  old  adage,  "  that  any  thing  is  worth  what  it 
will  fetch.'*     Whatever  a  thing  will  sell  for  is  certainly  the 


duncombe's  free  banking.  347 

price  of  it ;  but  it  does  not  prove  that  the  sale  price  is  the 
value  of  it. 

The  bills  of  the  banks,  established  under  the  New  York 
General  Banking  law,  may  pass  current  among  the  people, 
and  be  received  as  gold  and  silver  for  a  time  throughout  the 
state  of  New  York ;  yet,  to  render  them  quite  like  gold 
and  silver,  they  should  be  separated  from  credit,  have  their 
issues  based  exclusively  upon  the  precious  metals,  and  like 
them,  be  free  from  the  influence  of  private  interest,  and  the 
power  of  individuals  to  increase  the  circulation  from  sym- 
pathy with  the  borrower  or  personal  interest  as  stockhol- 
ders. What  we  are  desirous  of,  is  recommending  a  sys- 
tem which,  if  adopted,  will  exclude  the  possibility  of  notes 
being  discredited.  This  we  think  can  only  be  done  by 
separating  the  issuing  power  from  all  interest  in  the  issues 
made  ;  and  from  all  sympathy  with  the  borrower,  by  sepa- 
rating the  offices  of  issue  and  discount.  By  requiring  the 
directors  of  the  bank  of  discount  to  give  security  for  the 
performance  of  certain  well  defined  duties,  and  for  the 
prompt  and  punctual  payment  over  to  their  successors  in 
office,  of  all  money  and  property  of  the  bank  at  the  time  in 
their  possession ;  punctuality  in  business  will  be  best  pro- 
moted, by  giving  good  security  for  the  strict  compliance 
with  promises  and  undertakings. 

We  have  seen  the  wildness  of  speculations,  and  the  ex- 
travagance of  living  induced  by  excessive  issues  of  the 
chartered  banks,  under  their  limited  responsibility.  Can 
we  desire  its  continuance  or  its  repetition. 

The  great  difficulty  attendant  upon  an  incorporated  bank 
paper-currency  is,  the  uncertainty  of  effectually  preventing 
their  notes  from  being  discredited.  And  this  we  maintain, 
can  only  be  done  by  restricting  bank  issues  to  the  propor- 
tionate amount  of  specie  actually  in  their  vaults  at  the  tim^ 


348  buncombe's  free  ranking. 

(^  issue.  By  removing  temptation  to  excessive  issues  frorn 
the  directors,  of  either  banks  of  issue  or  the  banks  of  dis- 
count. The  business  of  the  banks  of  discount  should  be 
conducted  automatically,  by  well  established  and  clearly 
defined  laws  and  regulations.  The  directors  should  have 
their  operations  clearly  defined  and  explained  in  their  pub- 
lished monthly  reports,  (not  mystified)  for  the  public  inspec- 
tion, and  for  the  examination  of  state  directors  or  commis- 
sioners, whose  re-election  should  depend  upon  the  manner 
in  which  they  discharge  their  duties  as  state  directors,  to  be 
approved  or  rejected  at  the  ballot-box.. 

Neither  the  directors,  nor  the  institutions  themselves, 
should  be  in  any  way  dependant  upon  the  legislature  for 
any  grant,  privilege,  right,  interest,  or  matter  or  thing  con- 
nected with  the  legislature  or  executive  government.  The 
currency  should  be  as  independent  of  party  as  the  issues  of 
the  mint. 

The  passage,  by  congress,  of  a  general  free  banking  law„ 
upon  republican  principles,  would,  with  a  little  experience, 
accomplish  this  desirable  object.  The  people,  having  the 
control  of  the  money,  would  elect  directors  who  would  ac- 
commodate the  fair  trader,  and  expend  the  money  they  bor- 
row in  the  improvement  of  their  private  fortunes,  and  in 
their  accommodation  in  business,  or  in  necessary  profitably 
public  works;  while  the  foreign  gambling  speculator  \yo;uld 
be  precluded  from  bank  credit,,  or  only  share  equally  with, 
the  fair  businesss  nien  of  the  place. 

Let  me  once  more  repeat,  that  the  circulating  medium 
sliould  bo  equally  current  in  every  part  of  the  Unipn  : 
separated  from  politics  and  from  credit  and  from  private  ii. 
terest,  and  always  perfectly  and  indisputably  convertible 
at  sight,  at  the  counter  where  it  was  put  in  circulation  ; 
li-ee  from  any  connection  or  influence  of  the  foreign  or  do- 
mestic money  n\arket,  or  of  the  exchanges. 


duncombe's  free  banking,  349 

So  much  of  the  currency,  as  is  not  composed  of  the  pre- 
cious metals,  should  be  so  perfectly  based  upon  them,  that 
any  contingency  or  circumstance  of  trade  or  of  credit,  at 
home  or  abroad,  should  not  inflate  the  currency  beyond  the 
limits  of  the  actual  demand,  and  the  precious  metals  in  their 
vaults  justify,  so  that  the  bank  credit  currency  of  the  coun- 
try may  not  be  made  a  substitute  for  capital.  Currency 
should  only  be  issued  in  such  quantity  that  it  can  constantly 
pass  freely  from  hand  to  hand  ;  it  is  only  the  instrument  by 
which  all  other  commodities  are  measured  in  value,  and 
which  answers  the  purpose  of  the  receiver  for  a  measure 
of  value  for  him,  and  the  medium  of  exchange.  When 
bank  notes,  based  upon  credit,  are  used  as  capital,  the  effect 
upon  currency  is  the  same  as  if  a  smith  put  up  his  own 
tools  and  investments  for  sale,  or  manufactured  them  into 
marketable  articles. 

Unlimited  individual  liability  of  the  stockholders  would 
do  much  towards  securing  the  bill-holders,  were  it  not  that 
there  are  innumerable  ways  by  which  this  responsibility 
would  be  liable  to  be  avoided,  by  the  nominal  or  actual 
transfer  of  the  bank  stock  to  minors  and  men  of  straw,  by 
which  the  actual  security  of  the  bill-holder  would  be  ren- 
dered merely  nominal. 

The  giving  honajide  security  to  the  public  for  the  bene- 
fit of  the  bill-holder,  is  certainly  better  security  than  the 
limited  responsibility  of  incorporated  stockholders. 

I  have  said  nothing  of  the  General  Banking  law  not  pro- 
viding security  for  depositors  or  other  creditors ;  for,  by  a 
legal  fiction,  incorporated  companies  are  considered  artifi- 
cial bodies.  And  although  strictly  speaking,  banking  asso- 
ciations are  not  incorporated  companies  ;  yet,  they  are  ca- 
pable of  suing  and  being  sued,  and  of  maintaining  perpet- 
ual succession,  and,  consequently,  under  the  same  respon- 
p3* 


350  buncombe's  free  banking. 

sibilities  as  other  bodies,  firms  or  houses.  Hence,  deposi- 
tors, and  other  creditors,  have  the  same  means  of  investiga- 
ting the  solvency  and  liabilities  of  the  banks,  before  making 
the  deposite  or  entering  into  any  contract  with  them,  as 
they  would  have  of  learning  the  responsibility  of  any  pri- 
vate individual  with  whom  they  may  deal.  The  case, 
however,  is  materially  different  with  the  bill-holder.  He 
receives  the  bank  note  as  money ;  and  from  the  very  na- 
ture bills  are  designed  to  perform,  the  rapidity  with  which 
they  are  required  to  pass  from  hand  to  hand  in  the  ordinary 
transaction  of  business,  precludes  the  receiver  from  the 
possibility  of  enquiring  into  the  responsibility  of  the  draw- 
ers. Besides  this,  the  great  number  of  banks  in  the  United 
States,  being  not  less  than  nine  hundred  banks  and  branch- 
es, and  the  great  number  of  unauthorised  banking  houses, 
precludes  even  men  of  the  most  extensive  business  from  a 
knowledge  of  the  character  of  the  bills  they  occasionally 
receive. 

If  the  legislature  have  a  right  to  pass  laws  for  the  pun- 
ishment of  crimes,  how  much  more  commendable  the  pas- 
sage of  laws  to  prevent  crimes,  by  removing  the  tempta- 
tion to  crime. 

The  coining  or  circulating  base  coin,  and  forging  or  pas- 
sing counterfeit  bank  notes,  is  capitally  punished  in  some 
countries,  and  severely  punished  in  all  christian  or  commer- 
cial countries.  If  the  committal  of  this  crime  is  so  severely 
punished  by  law  throughout  Christendom,  ought  not  le- 
gislatures to  remove  the  temptation  to  the  commital  of  the 
crime  by  such  salutary  laws  as  they  have  it  in  their  power 
to  pass?  The  cause  of  humanity  is  much  better  promoted 
by  the  prevention  than  by  the  punishment  of  crime. 

The  New  York  General  Banking  law  commences  by  au- 
thorising the  Comptroller  of  the  State  **to   cause  to    be 


duncombe'h  free  banking.  351 

engraved  and  printed,  in  the  hest  manner^  to  guard  against 
counterfeiting^  such  quantity  of  circulating  notes,  in  the  si- 
militude of  bank  notes,  in  blank,"  &c. 

The  legislature  of  the  state  of  New  York  have  very 
wisely  considered  the  preventing  the  crime  of  counterfeit- 
ing as  one  of  so  much  importance  as  to  place  it  first  in  the 
provisions  of  the  New  York  General  Banking  law,  not  on- 
ly because  it  prevents  the  commital  of  a  most  flagrant 
crime,  but  because  it  protects  the  confiding  public  from  the 
loss  and  injury  occasioned  by  the  passage  of  forged  or  coun- 
terfeit bank  paper. 

If,  then,  the  legislature  so  zealously  and  wisely  protect 
the  public  from  the  ruinous  effects  of  counterfeit  money ,^ 
ought  they  not,  with  equal  care,  to  protect  them  from  a  still 
more  dangerous,  because  a  more  insidious,  foe,  that  of  the 
passage  and  circulation  of  uncurrent  money  %  Notes  whol- 
ly counterfeit,  that  is,  notes  no  part  of  which  will  be  paid, 
are  not  defended  by  any  body,  because  there  is  none  who 
will  receive  them  in  change,  knowing  them  to  be  wholly 
inconvertible  ;  yet,  notes  partly  counterfeit  and  partly  gen- 
uine, have  their  defenders  and  receivers  in  trade,  that  is,  in 
exchange  for  articles  at  such  an  advanced  price,  that  the  ex- 
changer ultimately  receives  but  a  small  part  of  the  nominal 
amount  of  his  bills.  So  far  as  the  prosperity  of  the  indi- 
viduals or  of  the  public  are  concerned,  notes  uncurrent,  as 
they  are  politely  termed,  are  as  effectually  counterfeits  in 
such  part  as  they  are  uncurrent,  as  the  notes  that  are  wholly 
uncurrent,  whether  the  notes  of  broken  banks,  notes  of  fic- 
titious banks,  or  counterfeit  notes  of  solvent  banks. 

If  a  crime  against  a  statute  law,  such  as  that  of  passing 
counterfeit  bank  notes,  varies  in  its  magnitude  and  turpi- 
tude, the  evil  is  in  proportion  to  the  injury  done  to  society. 
A,nd  he  who  defrauds  his  fellow  man  of  one  dollar  is  not  as 


352  buncombe's  free  banking. 

culpable,  so  far  as  the  protection  of  the  public  from  loss  and 
injury  in  their  property  is  concerned,  as  him  who  defrauds 
thousands  of  persons  of  hundreds  of  dollars.  The  moral 
guilt,  perhaps,  of  the  offender  may  be  measured  by  the  mor- 
al punishment  that  the  laws  of  God  and  man  award  to  the 
crime  ;  yet,  the  duty  of  the  legislature,  as  we  have  seen,  is 
as  necessary  to  prevent  crime,  by  removing  the  temptation  to 
the  commital  of  it,  as  to  punish  criminals  after  the  crime 
has  been  committed  with  a  view  of  deterring  others  from 
the  commital  of  similar  offences. 

Hence,  we  infer,  that  he  who  passes  only  a  few  bills  of 
a  bank  that  he  knows  has  failed,  or  a  few  notes  of  a  ficti- 
tious bank,  or  a  few  notes  that  are  counterfeit,  knowing 
them  to  be  such,  upon  innocent  persons  who  believe  them 
to  be  current  money,  is  only  culpable  to  the  amount  of  in- 
jury he  does  society,  although  the  crime  may  involve  him 
in  a  punishment  for  life.  And  we  maintain,  that  he  who  ut- 
ters promises-to-pay  as  money,  and  circulates  them  among 
unsuspecting  persons  as  convertible  current  money,  know- 
ing them  to  be  at  the  time  inconvertible,  or  that,  from  their 
funds  or  business  they  are  likely  soon  to  become  inconverti- 
ble, or  that  they  are  convertible  at  five  or  ten  per  cent,  be- 
low par,  is  worse  than  him  who  passes  wholly  uncurrent 
money,  because  he  adds  his  public  character  to  the  currency 
of  the  note  to  make  it  pass,  while  he  who  passes  wholly  uu'- 
current  money,  knowing  it  to  be  such,  carefully  avoids  be^ 
ing  known,  and  the  receiver  takes  it  upon  his  own  respon- 
sibility ;  while  he  who  passes  notes  to  the  amount  of  $100, 
only  ten  per  cent,  counterfeited,  and  ninety  per  cent,  genu- 
ine, puts  in  circulation  ten  dollars  of  counterfeit  money, 
that  is,  of  money  that  is  not  what  it  purports  to  be,  that  is, 
ten  dollars  that  is  not  worth  more  than  blan  k  paper,  and 
ih^t  produces  the  same  injury  and  loss  to  the  receiver,  as  if 


ditncombe's  free  banking.  353 

he  had  passed  him  ten  ten  dollar  notes,  one  of  which  was 
counterfeit.  The  evil  is  worse  on  another  account.  The  coun- 
try people  cannot  separate  the  counterfeit  part  of  the  mon- 
ey, notes  or  bills,  from  the  genuine  part ;  and  hence  the 
broker,  or  exchanger,  must  have  his  profit  on  the  business 
of  exchanging.  And  this,  together  with  the  trouble  and 
expense  of  sending  or  taking  it  to  a  broker  or  exchanger,  is 
all  to  be  added  to  the  loss  of  the  innocent  receiver,  so  that 
he  must  loose  perhaps  fifteen  dollars  instead  of  ten  dollars 
on  the  one  hundred  received.  But  this  species  of  counter- 
feiting extends  the  evil  still  farther.  The  man  who  has  re- 
ceived the  hundred  dollars,  with  only  ten  per  cent,  coun- 
terfeited, that  is,  ten  per  cent,  in  promises- to-pay  above 
the  actual  pay  ever  to  he  received,  feels  that  this 
has  cost  him  honestly  and  fairly  8100,  and  that  he  ought 
not  to  loose  ten  per  cent,  discount,  as  it  is  politely 
called,  so  he  silently  passes  one  bill  here,  and  another  bill 
there,  upon  the  unsuspecting  and  unwary  for  their  full  val- 
ue ;  or  if  he  does  not  get  really  the  value  himself,  as  he 
not  unfrequently  buys  what  he  does  not  want  for  part  of  the 
value  of  the  bill  to  get  it  changed  into  more  current  money, 
he  thus  extends  the  loss  and  divides  it  perhaps  among  ten 
persons,  who  are  all  interested  in  passing  the  uncurrent 
notes  at  par,  and  consequently  their  characters  are  added  to 
the  reputation  of  the  bills  to  impose  upon  many  more  ;  and 
hence  the  greatest  of  all  the  evils,  (even  far  greater  than 
the  loss  of  the  ten  or  fifteen  dollars  that  must  ultimately  be 
sustained  by  somebody,  before  the  $100  of  uncurrent  notes 
can  be  made  to  pass  current  as  specie,)  is  its  immoral  eifects 
upon  society.  The  great  evil  is,  the  loss  of  moral  principle — 
the  overturning  that  moral  character,  that  correct  and  hon- 
orable feeling,  that  gives  virtue  to  human  nature,  stability 
tp  spciety,  and  strength  to  a  nation,     The  m^n  who  wovild 


354  buncombe's  free  banking. 

not  steal  ten  dollars  from  his  confiding  neighbor,  and  who 
respects  his  neighbors  property  as  he  does  his  own,  thus, 
by  degrees,  becomes  familiarized  to  crime.  His  conscience 
may  at  first  have  asked  him  whether  it  was  strictly  honest 
for  him  to  pass  an  uncurrentnote  upon  a  traveller  for  its  full 
value,  who  never  could  receive  but  nine  dollars  for  the  ton, 
and  he  must  have  felt  that  he  would  much  rather  the  mon- 
ey would  pass  current  with  the  traveller,  as  though  the 
passage  of  it  from  him  as  current  money,  would  relieve 
himself  from  the  guilt  or  crime  of  passing  it.  But  the  evil 
may  be  increased  instead  of  being  lessened  by  its  repeated 
passage  ;  for,  as  many  as  pass  the  notes  at  par,  knowing 
them  to  be  uncurrent,  become  involved  in  a  moral  crime — 
a  crime  against  the  laws  of  God,  only,  to  be  sure,  but  one 
that  destroys  that  firm  moral  bulwark  of  all  virtuous  and 
moral  peoples.  They  may  continue  to  pass  uncurrent  mon- 
ey until  they  will  boast  of  having  passed  it,  knowing  it  to 
be  uncurrent  upon  the  unwary.  Alas!  "  when  all  shame  Is 
lost  all  virtue  is  lost.'' 


CHAPTER  XLIV. 

ON  ANNUAL  LEGISLATION    UPON  FORMS  OF  GOVERNMENT,  OR 

UPON    CURRENCY. 

Annual  legislatioa  upon  formi  of  government  compared  with  annual  legislation 
upon  currency. 

What  would  be  the  situation  of  the  United  States,  or  in 
short  of  any  other  country,  were  they  to  legislate  annual- 
ly upon  their  forms  of  government  *? 

Whatever  be  the  forms  of  government  adopted  by  any 
country,  whether  republican  or  monarchical,  the  frequent  dls- 
cussiou  of  their  elementary  principles  has  been  sedulously 


BUNCOMBE  S  FREE  BANKING.  355 

avoided.  And  when  discussed  upon  occasions  of  indispensa- 
ble necessity,  it  should  be  entered  upon  with  reserve,  cau- 
tion, prudence  and  judgement,  not  rashly,  passionately  or 
unadvisedly.  The  venerable  founders  of  our  form  of  gov- 
ernment carefully  provided,  by  our  present  constitution, 
that  it  should  not  be  altered  or  amended,  until  such  altera- 
tions and  amendments  had  been  discussed  in  Congress,  and 
afterwards  considered  and  acted  upon  by  the  people,  and 
carefully  reviewed  and  debated  by  Congress  again,  before 
it  becomes  part  of  the  constitution  of  these  United  States. 
The  constitution  is  thus  preserved  from  the  influence  of 
great  party  political  excitements  and  dangerous  hasty 
changes  ;  our  diplomacy  with  foreign  countries  is  thus  pre- 
served respectable  and  uniform  in  its  character,  command- 
ing the  respect  of  other  nations,  and  the  esteem  of  our  own 
citizens. 

The  same  rule  is  applicable  to  currency,  so  far  as  per- 
manence and  stability  in  both  are  required,  and  so  far  as  the 
frequeut  discussions  of  the  subject  produces  useless  and 
dangerous  excitements. 

Frequent  legislation  upon  the  subject  of  currency  is  lia- 
ble to  render  it  the  instrument  of  party  success  or  party 
policy,  and  thereby  as  fluctuating  as  is  the  ebbings  and  flow- 
ings  of  party  excitements.  This  renders  it  unfit  for  a  meas- 
ure of  all  values. 

A  sound  currency  is  as  indispensably  necessary  to  the 
permanent  prosperity  of  a  country,  as  a  sound  government 
is  to  its  peace  and  happiness. 

Governor  Throop,  in  his  message  to  the  legislature  of  the 
state  of  New  York,  in  1832,  says  :  "  Here  national  pros- 
perity is  the  prosperity  of  every  individual.  Not  a  cent  is 
contributed  by  way  of  tax — not  a  dollar  is  expended  from 
the  public  coffers,  which  is  not  assented  to  by  the  people, 


356  dtjncombe's  fbee  banking. 

and  employc^-d  to  enlarge  their  means  of  enjoyment.'*  In 
a  country  thus  free  and  independent  in  their  politics,  is  it 
not  very  unfortunate  that  their  currency  forms  an  excep* 
tion — that  the  frequent  discussions  upon  the  subject  keeps 
it  constantly  fluctuating  and  unstable  ?  While  the  charter- 
ed companies  tax  the  public  in  sums  more  than  equal  to  all 
the  annual  expenses  of  the  government  for  the  use  of  their 
credit  to  circulate  as  money,  we  have  taxation  without  re- 
presentation. But  this  system  will  not  always  continue. 
The  spirit  of  enquiry  is  abroad,  and  people  begin  to  ask 
why  paper  money  is  so  uncurrent,  and  why  they  are  incom- 
petent to  elect  directors  of  the  currency  as  well  as  directors 
of  their  political  machinery  ?  When  the  answer  is  heard, 
it  will  be,  we  are  able  and  will  elect  the  directors  of  our 
banks. 


THE    END. 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 

Renewed  books  are  subject  to  immediate  recall. 


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